5.

During the last calendar quarter of 2019, Naval Company granted a Filipino supervisory employee the
following benefits:

Salaries P120,000

Performance bonus P 20,000

13th month pay P 40,000

Excess de minimis P 12,000

Cash price of car given to supervisory employee P300,000

Compute fringe benefit tax.

a. P 168,000 (12K+300KX35%/65%) c. P 146,824

b. P 151,529 d. P 141,176

6. Logan paid the P27,200 monthly rental of the residence of it managerial employee from January to
May of 2019. Compute the fringe benefit tax for the first quarter and second quarter of 2019

a. P 6,400; P 6,400

b. P 12,941; P 8,533

c. P 19,200; P 12,800

d..P21,969;P 7,323 (27,200X3X50%=40,800X35%/65% and 27,200X2X50%=40,800X35%/65%)

7. On August 1, 2019, Calbayog designated the use of its residential unit for its managerial employee.
The residential unit was acquired for P4,500,000 and has a fair value of P4,000,000

a. P 100,000; P 100,000

b. P 52,941; P 52,941

c. P 13,235; P 13,325

d. P 10,096; P 15,144

e. 21,969: 14,646 (4.5MX5%X50%/4X35%/65%)

8. Borongan Company granted the following fringe benefits in 2016:

- January 15 – paid P68,000 for the birthday celebration expense of its vice president for operations.
- February 14 – distributed iPhones costing P47,600 each to four supervisory employees as incentives.

- April 2 – granted the use of residential unit to the vice president for finance with fair value of
P3,000,000.

- August 4 – transferred ownership of a residential dwelling with zonal value of P4,000,000 and assessed
value of P3,000,000 to the company president.

- December 15 – distributed P896,000 in the 13th month pay to all employees (20% of this relates to
managerial or supervisory employees)

Compute the quarterly fringe benefit tax to be remitted by Borongan Company in the first quarter and in
the second quarter.

a. P 139,138; P 10,095

b. P 121,600; P 8,823

c. P 54,400; P 70,588

d. P 32,000; P 35,294

9. What is the fringe benefit tax respectively in the third and fourth quarters?

a. P 1,891,176; P 8,823

b. P 1,882,253; P 84,329

c. P 2,163,942; P 10,095

d. P 1,882,353; P 0

10. Baybay Corporation maintains a fleet of motor vehicles for business use and employees use. The
following relates the calendar quarter just ended:

Cost of three motor vehicles used exclusively for Sales, freights and delivery service P4,500,000

Cost of a motor vehicle for employees’ business Use and employees use P 500,000

Rental payments for additional motor vehicle for The employees’ personal use P 30,000

Compute the total quarterly monetary value of the fringe benefit.

a. P 4,350,000 c. P 42,500 (500K/5X50%/4+30K)

b. P 530,000 d. P 80,000
11. ABC Company owns a residential lot which was purchased for P800,000, eight years ago. The lot was
sold to a supervisory employee for only P500,000 when it was worth P1,200,000.

Compute the fringe benefit expense

a. P 300,000

CASH 500K

FRINGE BENEFIT EXPENSE 300K

LOT 800K

b. P 400,000

c. P 700,000

d. P 0

12. Compute the fringe benefits tax.

a. P 141,176 c. P 329,412

b. P 188,235 d. P 376,923 (700KX35%/65%)

CHAPTER 13 PRINCIPLE OF DEDUCTIONS

TRUE OR FALSE PART 1

The cost of investment and land are deductible against their proceeds in the year of sale. True

The entire cost of depreciable properties is deductible against their proceeds in the year of sale. False

Prepaid expenses are deductible upon payment consistent with the rule that advance incomes are
taxable upon receipt. False
Capital expenditures are deductible against future income. True

Personal expenses are deductible from gross income. False

Losses on properties not used in business may be deducted but only to the extent of capital gains. True

Expenses intended for the business and the personal use of the taxpayer must be allocated between the
two. Only the portion pertaining to the business is deductible. True

The expense of defending a patent is a business expense deductible in the current period. False

The depreciation of the property revaluation gain is deductible. False

Supplies and inventories are expensed using the inventory method. True

TRUE OR FALSE PART 2

So long as the expense relates to the generation of an income subject to any income tax, the same is
deductible against gross income subject to regular tax. False

The amount of expense between affiliated companies may be adjusted by the BIR to reflect their arm's
length value. True

The failure to deduct creditable withholding tax on income payments will render the expense
nondeductible. True

Immaterial expenditures must always be capitalized. False

Repairs that increase property useful life are capitalized. True

Repairs that increase property value are capitalized. True

An unpaid expense may be deducted under the accrual basis of accounting. True

The government should not enrich itself at the expense of the taxpayers. Losses between related parties
are deductible in the same way game between related parties are taxable. False

Taxpayers opting to use the optional standard deduction must also maintain records of their expenses.
False

Deduction incentives are deductible because they are actual expense. False

MULTIPLE CHOICE- PROBLEM

1. Spartan Corporation had office supplies valued at 40,000 on January 1 2020. At the end of the first
calendar quarter it had 80,000 worth of office supplies. Total supplies purchased were 250,000 during
the period.

Compute the supplies expense to be deducted during the first quarter.

280,000

250,000

210,000 (40K+250K-80K)

290,000

2. A non-resident alien not engaged in business incurred business expenses of 100,000 and personal
expenses of 20,000.

How much is expense deductible from his gross income?

100,000
20,000

120,000

3. taxpayer paid the following salaries during the year:

Salaries of administrative employees 80,000

Salaries of sales and marketing employees 70,000

Salaries of factory production workers 120,000

Compute the deductible salary expense

120,000

270,000

150,000 (80K+70K)

200,000

4. On July 1 2018, a taxpayer purchased equipment for 500,000 which was estimated to be useful until
July 1 2023, with an expected 100,000 residual value.

Compute the 2018 depreciation expense using the straight-line method.

80,000

40,000

50,000

5. On September 30 2020, a taxpayer borrowed 1 million at 10% annual interest to finance his
acquisition of a luxury car.
Compute the deductible interest expense in 2020.

50,000

75,000

25,000

6. A taxpayer paid 45,000 property insurance having a 12 month coverage starting March 1, 2018.

Compute the deductible insurance expense in 2018.

37,500 (45K/12mos x 10)

45,000

7,500