School of Business and Computer Studies

FinalExamination in
INCOME TAXPART 2
Prepared by: ATTY. RENATO C. LAGANGAN
SecondSemester, AY 2019-2020
VISION: A community of dynamic scholars and learners within the Asia Pacific Region of higher learning, upholding the highest standards
of excellence in education, research and community service, towards the attainment of a better quality of life
MISSION: To purposively link quality education, training, and research with community service in pursuing the holistic development of
individuals through innovative programs and productive activities attuned to the needs of the global community.
GOALS:
St. Dominic College of Asia, a private non-sectarian HEI, aims to:
1. Prepare the students to be competent, productive, and socially responsible individuals professionals.
2. Actively promote research and the utilization of new technology for the enhancement of individual competencies.
3. Assume leadership role in addressing the concerns of the academic community towards improving their quality of life.
CORE VALUES:
St. Dominic College of Asia performs its various roles toward the achievement of its Vision-Mission-Goals as it anchors itself on a four-
point set of core values:
S – Service; D – Dynamism; C – Competence; A – Accountability
Program Educational Objectives (PEO): Bachelor of Science in Accountancy
The objectives of the program are:
1. Have acquired and developed professional competence required in local and off-shore training and development as staff or supervisor
in accounting, auditing, consulting, tax and other related works both in local and international industry.
2. Have engaged in the practice of the accountancy profession in any of the four sectors: education, public practice, government and
commerce and industry.
3. Conducted himself in a respectable manner that upholds the honor, dignity and integrity of accountancy profession by adhering to the
code of professional ethics.
4. Have actively involved/active involvement in community service towards the improvement and development of the society.

COURSE OUTCOMES
At the end of the semester, the students must have:
1.(A) Obtain a sufficient comprehensive knowledge in Partnership & Corporation accounting as practiced by business organizations.
2. (A) Develop and exercise professional attitude by being honest, objective, technically competent and diligent in handling and managing
partnership and corporation accounting activities.b
3. (K) Learn how to interpret and integrate tools, laws, policies and procedures in managing partnership and corporation accounting
activities.

NAME: MARK JAYSON B. LEGASPI YEAR & SECTION: BSA-2A

PERMIT NO. _______________ DATE:____________________ SCORE:__________________

CHOOSE THE BEST ANSWER. WRITE

YOUR ANSWERS ON OR BEFORE THE SPACE
IMMEDIATELY PRECEDING EACH NUMBER.
1. _C__It is the actual seizure of the goods of a delinquent taxpayer for the purpose of
collection of the tax
A. Abatement C. Distraint
B. Compromise D. Answer not given

2. _A__Mr. Andoy is a partner of ABSCBN & Co., a general professional partnership, and owns 25%
interest therein. The gross receipts of ABSCBN & Co. amounted to P10,000,000.00 for taxable year
 2018. The recorded cost of service and operating expenses of ABSCBN & Co. were P2,750,000.00
and P1,500,000.00, respectively. If ABSCBN & Co. avails of the OSD, how much is the income tax
liability of ABSCBN & Co. for 2018?
A. None C. P1,305,000
B. P 1,242,000 D. Answer not given
3. _B__Mr. Andoy is a partner of ABSCBN & Co., a general professional partnership, and owns 25%
interest therein. The gross receipts of ABSCBN & Co. amounted to P10,000,000.00 for taxable year
2018. The recorded cost of service and operating expenses of ABSCBN & Co. were P2,750,000.00
and P1,500,000.00, respectively. If ABSCBN & Co. avails of the OSD, how much is the income tax
liability of Mr. Andoy for 2018, assuming that his share in the partnership is his only source of
income?
A. None C. P 1,242,000
B. P 216,250 D. Answer not given
4. _B__Mr. Andoy is a partner of ABSCBN & Co., a general professional partnership, and owns 25%
interest therein. The gross receipts of ABSCBN & Co. amounted to P10,000,000.00 for taxable year
2018. The recorded cost of service and operating expenses of ABSCBN & Co. were P2,750,000.00
and P1,500,000.00, respectively. If ABSCBN & Co. avails of the itemized deduction, how much is the
income tax liability of Mr. Andoy for 2018, assuming that his share in the partnership is his only
source of income?
A. None C. P 1,242,000
B. P 321,250 D. Answer not given

5. _B__Mr. Andoy is in the retail business. He received a deficiency tax assessment from the BIR
containing only the computation of the deficiency tax and the penalties, without any explanation of
the factual and legal bases for the assessment. Is the assessment valid?
A. The assessment is valid; all that Mr. Alvarez has to know is the amount of the tax.
B. The assessment is invalid; the law requires a statement of the facts and the law upon which the
assessment is based.
C. The assessment is valid but Mr. Alvarez can still contest it.
D. The assessment is invalid because Mr. Alvarez has no way to determine if the computation is
erroneous.

6. __A_Andoy, a compensation income earner, filed his income tax return for the taxable year 2007 on
March 30, 2008. On May 20, 2011, Andoy received an assessment notice and letter of demand
covering the taxable year 2007 but the postmark on the envelope shows April 10, 2011. His return is
not a false and fraudulent return. Can Andoy raise the defense of prescription?
A. No. The 3 year prescriptive period started to run on April 15, 2008, hence, it has not yet expired
on April 10, 2011.
B. Yes. The 3 year prescriptive period started to run on April 15, 2008, hence, it had already expired
by May 20, 2011.
C. No. The prescriptive period started to run on March 30, 2008, hence, the 3 year period expired
on April 10, 2011
 D. Yes. Since the 3-year prescriptive period started to run on March 30, 2008, it already expired by
May 20, 2011.

7. _C__What is the effect on the tax liability of a taxpayer who does not protest an assessment for
deficiency taxes?
A. The taxpayer may appeal his liability to the CTA since the assessment is a final decision of the
Commissioner on the matter
B. The BIR could already enforce the collection of the taxpayer's liability if it could secure authority
from the CTA.
C. The taxpayer's liability becomes fixed and subject to collection as the assessment becomes final
and collectible.
D. The taxpayer's liability remains suspended for 180 days from the expiration of the period to
protest.

8. _A__Which statement is correct? The collection of a deficiency tax assessment by distraint and levy:
A. May be repeated, if necessary, until the full amount due, including all expenses, is collected;
B. Must be done successively, first by distraint and then by levy;
C. Automatically covers the bank deposits of a delinquent taxpayer;
D. May be done only once during the taxable year.

9. _C__The Commissioner of Internal Revenue may NOT inquire into the bank deposits of a taxpayer,
except:
A. When the taxpayer files a fraudulent return;
B. When the taxpayer offers to compromise the assessed tax based on erroneous assessment;
C. When the taxpayer offers to compromise the assessed tax based on financial incapacity to pay
and he authorizes the Commissioner in writing to look into his bank records;
D. When the taxpayer did not file his income tax return for the year.

10. _A__The BIR discovered that a mathematical error in the computation of the income tax
of Andoy for 2019 makes him still liable for P 150.00. The BIR did not pursue the collection. What
remedy was used by the BIR?
A. Abatement C. Distraint
B. Compromise D. Answer not given

11. __B_What is the rate of tax of a non-resident lessor of vessels chartered by a Philippine national?
A. 2 ½% C. 7 ½%
B. 4 ½% D. Answer not given

12. __A_What is the rate of tax of a regional operating headquarters of a multi-national corporation in
the Philippines?
A. 10% C. 30%
B. 15% D. Answer not given
13. __B_What is the rate of tax for branch profits remittances of a resident foreign corporation to its
head office?
A. 10% C. 30%
B. 15% D. Answer not given

14. __A_Andoy Corporation shows the following income and expenses for the following years:
Gross Income Deductions
2018 1,000,000 999,000
2019 1,800,000 1,782,000
2020 1,500,000 1,420,000
2021 1,300,000 1,200,000
2022 2,000,000 1,850,000

How much is the income tax liability of Andoy Corporation for 2018 assuming that it is a domestic
corporation which started operations in January 2016?
A. P300. C. P19,700
B. P20,000 D. Answer not given

15. __B_ In the preceding number, how much is the income tax liability of Andoy Corporation for 2019
assuming that it is a domestic corporation which started operations in January 2016?
A. P5,400 C. P30,600
B. P36,000. D. Answer not given

16. _B__In number 14, how much is the income tax liability of Andoy Corporation for 2020 assuming
that it is a domestic corporation which started operations in January 2016?
A. P24,000 C. P6,000
B. P30,000. D. Answer not given

17. __D_In number 14, how much is the income tax liability of Andoy Corporation for 2021 assuming
that it is a domestic corporation which started operations in January 2016?
A. P26,000 C. P4,000
B. P30,000 D. Answer not given.

18. __A_In number 14, how much is the income tax liability of Andoy Corporation for 2022 assuming
that it is a domestic corporation which started operations in January 2016?
A. P-0- C. P45,000
B. P38,400. D. Answer not given

19. __B_Andoy Corporation shows the following data for 2020

Sales 1,000,000
Beginning Inventory 2,400,000
Ending Inventory 2,320,000
Purchases 600,000
Accounts Written-off 11,000
 Representation Expenses 120,000
Interest Income (bank deposit) 5,100
Interest Expense 8,000
Bad Debts Expense 17,000

How much is the MCIT of Andoy Corporation for 2020?

A. P20,000 C. P13,600
B. P6,400 D. Answer not given

20. _A__In number 19, how much is the allowable deduction for Bad Debts?
A. P11,000 C. P13,600
B. P17,00 D. Answer not given

21. A In number 19, how much is the allowable deduction for Representation Expense?
A. P5,000 C. P120,000
B. P10,000 D. Answer not given

22. _B__In number 19, how much is the allowable deduction for Interest Expense?
A. P1,000 C. P8,000
B. P6,317 D. Answer not given

23. _B__Andoy Catholic College, a proprietary school, organized in 2000, had the following data for
2018
Tuition Fees P 480,000
School related expenses 945,000
Rental Income (Net of 5% cwt) 494,000

The income tax still due for 2018 is:

A. P16,500 C.(P6,000)
B. (P9,500) D. Answer not given

24. _D__Andoy Airlines, a resident foreign international carrier has the following records of income for
the period. (The income represents gross billings.)

Continuous flight from Manila to Tokyo = 1,000 tickets @P1,000/ticket

Flight from Manila to Taipei; transfer flight (on I.I. Airlines) from Taipei to Tokyo = 2,000
tickets @P2,000/ticket
Continuous flight from Manila to Taipei = 3,000 tickets @ P1,000/ticket

The income tax due is:

A. P225,000 B. 175,000 C. 125,000 D. 100,000

Nos. 25-27 The Andoy Corporation provided the following data for the calendar year 2018:
Philippines Abroad
 Gross Income P4,000,000 $40,000
Deductions P2,500,000 $15,000
Income Tax Paid $ 3,000
($1 = P50)

25. __C_If Andoy Corporation is a domestic corporation, its income tax after tax credit is:
A. P962,500 B. 812,500 C. 675,000 D. 525,000

26. _D__If it is a resident foreign corporation, its income tax is:

A. P730,000 B. P525,000 C. P480,000 D. P450,000

27. _C__If it is a non-resident foreign corporation, its income tax is:

A. P1,400,000 B. P1,280,000 C. P1,200,000 D. P730,000S

28. __C_Under number 25 above, if it opts to claim the tax paid abroad as a deduction from gross
income, the income tax is:
A. P910,000 B. P832,000 C. P780,000 D. P237,000

29. _B__Andoy Corporation, a domestic corporation, made the following income and expenses for
2019:
Gross Income P 800,000
Interest Income from bank deposits 2,000
Interest Income on Notes Receivable from customers 3,000
Interest Expense 14,000
Contributions to churches 39,000
Other Allowable deductions 500,000

How much is the allowable deduction for interest expense?

A. 12,000 C. 13,010
B. 13,340 D. 14,000

30. D Under number 29 above, how much is the total passive incomeof Andoy Corporation:
A. Exempt C. 82,553
B. 5,035 D. Answer not given

31. C Under number 29 above, how much is the tax liability of Andoy Corporation:
C. Exempt C. 82,553
D. 5,035 D. Answer not given