BSA

TEST 2: PROBLEM SOLVING 2 POINTS EACH

Problem 1: Andrea operates a pet shop and at the same time, offers interior design
services to her clients. The following data were provided by Andrea for 2023 taxable
year.

Pet shop:
Gross sales P1,800,000
Cost of sales 600,000
Operating expenses 200,000

Interior Design services:

Gross receipts 1,150,000
Cost of services 120,000
Operating expenses 80,000

21. How much is her income tax liability for the year?

22. Assuming Andrea signified her intention to be taxed 8% income tax rate. How much is
her income tax liability?

Problem 2. An individual sold the following property for the year 2023.

PROPERTIES ACQUISITION DATE DISPOSAL DATE SELLING COST

PRICE
Personal Car February 14,2023 November 19, 200,000 190,000
2023
Appliances May 16, 2017 December 300,000 279,400
24,2023
Laptop May 31, 2023 November 500,000 800,000
20,2023
House and Lot May 12, 2015 November 27, 200,000 300,000
2023
Real Property June 12, 2023 August 12, 2023 500,000 300,000

Office April 21, 2023 November 19, 5,000,000 2,000,000

Building 2023

23. For the year 2023, How Much is the amount from Gross income?

24. For the year 2023, How Much is the taxable income?

25. For the year 2023, Compute tax due and payable?

26. Assuming Daniel is a Domestic Corporation. How Much is the amount of Gross
Income?
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Problem 3: In June, 2023. Kathryn, a mixed income earner, borrowed money from the
following creditors to finance her Milk tea shop business named LoyalTEA and salon
Business name CUTniel.

From Karla, (her mother) Principal Amount 1M | Interest Rate 10%

From bank, Principal Amount 1M | Interest Rate 8%

The operations of her two businesses are as follows.

Sales 800k
Receipts 250k
Cost of Sales 100k
Cost of Services 150k
Rent expense 20k
Salaries expense 20k
EAR expense 10k
Depreciation expense 5k
Contribution to the foreign institution 3k
To the national government (Priority Activities) 2k
Compensation Income 570k
Dividend income from Domestic Corporation
Ordinary Gain 40k
Ordinary Loss 45k

27. How much is the total allowable deductions?

28. How much is her total taxable income?
29. Assuming, she opted for an 8% tax rate. How much is her income tax due and payable?

Problem 4: On January 2023, JHB corporation, aside from the operating expenses of 7.5M,
incurred interest expense of 400,000 which satisfied the prescribed requirement of
deductibility, but it is also earned interest income subject to final tax of 100,000 net
of final tex.

30. How much are the allowable deductions for interest expense?

Problem 5: Sandara Park (Resident Alien, received the following dividend income)
Jollibee Corp, (DC) 200,000
Kakitaki Corp, (RFC) 300,000
Mamimi Corp, (NRFC) 400,000

The Gorss income of the kakitaki Corp, from sources within and without the Ph for the past
3yrs were provided as follows:

Source 2020 2021 2022

Abroad 8M 11M 13M
PH 16M 15M 17M

31. How much is the income subject to RIT?

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Problem 6. A Taxpayer collected the following income during the year 2023
Rent Income (net of CWT 5%) P760,000
Interest income on Promissory notes 60,000
Prizes, Philippines 50,000
Prizes, USA 5,000
Interest Income on Bank deposits 10,000
Interest Income on Thailand Bank 30,000
Royalties from books 15,000
Royalties from books, Japan 10,000
PCSO Lotto 5,000
Illegal Income 1,000,000
Active royalties 280,000
Allowable Deductions 160,000

32. Assuming the taxpayer is the resident citizen, how much is the inclusion of Gross
Income?

33. Compute the income tax due and payable

34. Assuming the taxpayer is the resident Alien, how much is the income tax due and
payable?

Problem 7: Kate, Single received the ff during taxable yr?

Proceeds of his
life insurance paid at annual premium of 15k (25yrs) 2M

Proceeds of death of his mother’s

life insurance paid at annual premium of 10k (20yrs) 1M

House and Lot inherited from his mother. 4M

Rent income net of 5% CWT 522,500

35. For income tax purposes, how much is the inclusion in Gross income?

36. How much is the Income tax due?

Problem 8: Balanga, Inc. Contributed 500k for its pension fund inclusive of 200l funding
of CSC.

37. How much is the deductible pension expense?

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Problem 9: Mr. Peterson reported the ff income and expense 2024:

Compensation Income 400k

Gross Income from business 500k
Fully deductible contributions 50k
Deductible contributions subject with limit 75k
Other allowable deductions 200k
Mandatory deduction and exempt income 75k

38. Compute deductible contribution expense?

39. What is the taxable compensation income?
40. How much is the total taxable income?