MANILA BUSINESS COLLEGE

COLLEGE OF ACCOUNTS AND BUSINESS

INCOME TAXATION
MIDTERM EXAMINATION
AY 2022-2023

MULTIPLE CHOICE : Highlight the letter of the correct answer ( Provide computations for problem
questions, No credit for answers without solutions)

1. Which of the following statements us incorrect?

A. Taxes are the revenues raised in the exercise of the police power of the State
B. Taxes are the lifeblood of the government and their prompt and certain availability is an imperious need.
C. The power of eminent domain of the State is to acquire privet property for public purpose upon payment of
just compensation
D. Police power is when the State promotes public welfare by retraining and regulating liberty and property

2. In terms of the amount of imposition Taxation has :

A. Sufficient to cover the cost of the necessary expenses of the government
B. Limited imposition
C. No limit of imposition
D. Form of protection and benefits received from the government

3. Incidence of taxation means

A. Shifting of tax
B. Refunds of tax
C. payment of tax
D. Imposition of tax

4. This is a fundamental purpose of taxation is to raise the revenue necessary to fund public services.
Consequently , it is necessary that the sources of revenues must be adequate to meet government
expenditures and sustain the level of public services demanded by citizens and policymakers . This element of
a sound tax system is:
A. Theoretical Justice of Equity
B. Inherent limitations
C. Fiscal adequacy
D. Administrative feasibility

5. ___________ is the exploitation by the taxpayer of legally permissible alternative tax rates or methods of
assessing taxable property or income in order to avoid or reduce tax liability.
A. Shifting
B. Tax avoidance
C. Double taxation
D. Tax evasion

6. An escape from taxation where the producer or manufacturer pays the tax and endeavor to recoup himself
by improving his process production thereby turning out his units of products at a lower cost.
A. Tax evasion
B. Shifting
C. Transformation

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D. Tax exemption
7. There must be a valid law and the measure should not be unconscionable and unjust as to amount of
confiscation of property. This tax statute must not be arbitrary as to find support in the Constitution.
A. Equal protection of laws
B. Due process of law
C. Legislative prerogative
D. Territorial limitation

8. The following statements are the nature/characteristics of the State’s Power to tax , EXCEPT
A. It is inherent in sovereignty and the State can enforce contribution (tax) even in the absence of a
constitutional provision.
B. It is legislative in character . Levying or imposition is peculiarly and exclusively legislative in nature
C. Assessment or determination of the correct amount of applicable tax
D. None of the stated choices

9. Payment of tax is not voluntary payment or donation but an enforced contribution in accordance with a
legislative authority
A. An enforced contribution
B. Proportionate in character
C. Levied for public purpose
D. Levied by the law-making body of the State

10. The power of “imposing a tax being purely a legislative function.

A. An enforced contribution
B. Proportionate in character
C. Levied for public purpose
D. Levied by the law-making body of the State

11. The use by the taxpayer of illegal or fraudulent means to defeat or lessen the payment of tax.
A. Shifting
B. Tax avoidance
C. Double taxation
D. Tax evasion

12. This is a direct or indirect duplicate taxation

A. Shifting
B. Tax avoidance
C. Double taxation
D. Tax evasion

13. This is the place of taxation . It is the State or political unit which has jurisdiction to impose a particular tax.
A. Subject matter of tax
B. Situs of taxation
C. Nature of tax
D. Source of tax

14. Special assessment is an enforced proportional contribution with the following characteristics, EXCEPT
A. Levied on land
B. Based wholly on benefits
C. Personal liability of the person assessed
D. Exceptional Both as to time and place

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15. Tax laws must be capable of effective and efficient enforcement. A good tax system requires informed
stakeholders who understand how taxes are assessed , collected and complied with.
A. Inherent Limitations
B. Administrative Feasibility
C. Fiscal adequacy
D. Theoretical Justice of Equity

16-18. Mr. AJS a minimum wage earner works with JIL He is not engage in any trade of business and solely
derive its income from his employment. For the taxable year , 2018 He earned a total compensation of
P 150,000, including overtime pay, night differential pay and holiday pay of P 110,000 plus nontaxable 13th
month pay and bonus of P15,000. How much would be the income tax liability of AJS ? Provide computation to
justify your answer. If the compensation income is not subject to tax, Explain your answer.
A. -0-
B. P2,000
C. Cannot be determined
D. None of the above choices

19-20. Dr. Li-ann operates a mini grocery store and also engage in medical practice as a general surgeon. In
2018, her gross sales is P 300,000 including her gross receipts in connection with her medical practice
P800,000. She already opted her intention to pay the 8% preferential tax rate. What would be the amount of
tax due that she will pay for the 1st quarter?
A. P 68,000
B. P 145,000
C. -0-
D. P 45,000

21. Will Dr. Li-ann pays the 3% percentage Tax? If yes How much percentage tax will she pay to the BIR?

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22-30. Mr. WMM opted to pay the 8% preferential tax rate of 8% on his gross sales for the 1st, 2nd and 3rd
quarter .

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Total Sales P 300,000 P 600,000 P 1,500,000 P 4,500,000
Less : Cost of
Sales 100,000 200,000 600,000 1,000,000
Gross Profit P 200,000 P 400,000 P 900,000 P 3,500,000
Less: Operating 50,000 200,000 600,000 1,800,000
Expenses
NET INCOME P 150,000 P 200,000 P 300,000 P 1,700,000

A. How much will be the Income Tax due for the 1st, 2nd and 3rd Quarter?
B. How much will be the 3% percentage tax due for the 1st, 2nd and 3rd quarter?
C. How much will be the VAT Output payable that Mr. WMM will accrue for the 4th Quarter?
D. How much will be the Income Tax due for the year?
Provide computations to justify your answer.

II. TRUE OR FALSE : Write “True” if the statement is TRUE and “False “ if the statement is FALSE
31. ________ The power to tax should not be harsh , oppressive or confiscatory, this limitation is also known
as the right to notice and hearing.
32. ________ License fees are imposed in the exercise of police power
33. ________ Taxation power regulates both liberty and property.
34. ________ Tax is generally unlimited because it is based on the needs of the State.
35. ________ A person may refuse to pay on the ground that he will not receive a benefit from the tax.
36. ________ The power to tax includes the “power to destroy” where the tax is a valid tax.
37. ________ The State having sovereignty can enforce tax contribution by virtue also of a constitutional
Provision

38. ________Tax laws are retrospective in operation because the nature and amount of tax could not be
foreseen and understood by the taxpayer at the time the transactions which the law seeks to tax
was completed.
39. ________ Exemptions from taxation are highly favored in law.
40. ________ Husband and wife shall compute their individual income jointly based on their respective taxable
income.
41. ________ Minimum wage earners shall be exempt from the payment of income tax based on their
statutory minimum wage rates. The holiday pay, overtime pay, night shift differential pay and
hazard pay received by such earner are likewise exempt.
42. ________ Taxable Income - refers to the pertinent items of gross income specified in the Code, less 40%
Optional deductions only.
43. ________ Mixed Income Earner an individual earning compensation income from employment, and income
from business, practice of profession and/or other sources aside from employment.
44. _________ Gross Sales - refers to the total sales transactions net of VAT, if applicable, reported during the
period, with any other deduction.
45. _________Fringe Benefits given to non rank and file officers includes Housing , profit sharing , vehicle of
any kind and expense for foreign travel
46. _________ Employer and Employee Relationship - exists when a person for whom services were
performed (employer) has the right to control and direct an individual who performs his services
(employee), not only as to the result of the work to be accomplished but also as to the details,
methods and means by which it is accomplished. An employee is subject to the control of the
employer not only as to what shall be done, bit how it shall be done
47. _________ Penalty is a sum of money for the use of something, generally applied to the consideration
which is paid for then use of road, bridges and public nature.
48. _________ Custom duties are taxes imposed on goods exported from or imported into a country
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49. _________ Subsidy is a pecuniary aid directly granted to the government to an individual or private
commercial enterprise deemed beneficial to the public.
50. _________ Eminent domain may exercise by private service corporations

“ To God be HIS Glory”

***** END OF EXAMINATION *****

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