BSAIS

TEST 1: MULTIPLE CHOICE QUESTION 1 POINT EACH

1. Ana received the following winnings in 2021. Which of the following is subject to
Regular Income tax except;

a. P10,000 winnings outside the Philippines

b. P1,000,000 PCSO Lotto winnings
b. P6,000 Prizes in singing contest
c. P10,000 Prizes in Dance contest

2. Pedro was selected as the most outstanding “Barrio teacher” in his town. His name was
submitted by the school principal without his knowledge. He received a trophy and a cash
award of P50,000. The amount he received is

a. Regular income tax

b. Final tax
c. Exempt
d. Partly taxable, partly exempt

3. The term “capital assets” includes

a. Stock in trade or other property included in the taxpayers inventory

b. Real property not used in the trade or business of taxpayer
c. Property primarily for sale to customers in the ordinary course of business
d. Property subject to depreciation

4. Income from dealings in property (real, personal or mixed) is the gain or loss derived

a. Only from cash sale or property

b. From cash and Gratuitous receipts of property
c. From sale and lease of property
d. Only from the sale of property

5. Which of the following statements is incorrect?

a. Capital losses are deductible only to the extent of Capital gains
b. Ordinary losses are deductible only to the extent of ordinary gains
c. Ordinary gains are always subject to Regular Income tax
d. Capital gains may be subject to RIT

6. Rules on capital gains and losses of corporations, except

a. Capital gains and losses are recognized to the extent of 100% regardless of holding
period
b. The net capital loss carry over is not applicable
c. Capital losses are deductible only to the extent of Capital gains
d. There is a final tax of 5% on real property sold

7. In cases of deductions and exemptions on income tax returns, doubts shall be resolved

a. Strictly against the taxpayers

b. Strictly against the government
c. Liberally in favor of the taxpayer
d. Liberally in favor of the government

8. S1: Deductions are items or amounts allowed to be subtracted from gross income
S2: Exclusions are receipts which are excluded from gross income, hence, do not form
part of the gross income

a. Only S1 is correct
b. Only S2 is correct
c. Both statements are correct
d. Both statements are incorrect

9. S1: Only business expenses may be deducted from the gross income taxpayers S2:
Itemized deductions from gross income should be duly supported by vouchers or receipts

a. Only S1 is correct
b. Only S2 is correct
c. Both statements are correct
d. Both statements are incorrect
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10. S1: A taxpayer can only deduct an item or amount from gross income only if there is a
law authorizing such a deduction
S2: A taxpayer is free to deduct from gross income the full amount of deduction
allowed, or a lesser amount or not to claim at all.

a. Only S1 is correct
b. Only S2 is correct
c. Both statements are correct
d. Both statements are incorrect

11. Which of the following is the correct allowable entertainment expense?

a. not more than 0.01 of net revenue from services

a. not more than 0.005% of net sales from goods
b. not more than 1.5% of revenue from services
c. not more than 1.5% of net sale from goods

12. Active income is subject to

a. Regular income tax

b. Final tax
c. Exempt
d. Partly taxable, partly exempt

13. Which is not a feature of the Regular income tax?

a. Net income tax

b. Final withholding tax
c. Annual tax
d. Creditable withholding tax

14. Progressive income tax is applicable to

a. corporate taxpayers
b. individual taxpayers
c. compensation income earner only
d. individuals in business only

15. For individual taxpayers, what percentage of the capital gain or loss is considered
for capital assets held for not more than 12 months

a. 50%
b. 100%
c. 25%
d. 0%

16. Which is an ordinary assets?

a. gold inventory
b. Notes receivable
c. Accounts receivable
d. Investment in stocks

17. Which is deductible business expense?

a. interest on personal borrowings

b. rental of taxpayer’s domicile
c. selling commission to agents
d. wages of kasambahay

18. Which is not deductible tax expense?

a. Real property tax on business properties

b. Local business tax
c. Stock transaction tax
d. Percentage tax
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19. Research and development costs that are not chargeable to capital accounts can be
claimed as

a. outright expense
b. deferred expense subject to amortization
c. Both a and b
d. either a or b

20. Bonus point (My Favorite fruit)

a. Mango
b. Apple
c. Banana
d. Watermelon

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. On January 2023, JHB Corporation, aside from the operating expenses of P7.5M,
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 tax.

23. How much is the allowable deductions for interest expense?

Problem 3. Balanga, Inc. contributed P500,000 for its pension fund inclusive of 200,000
funding of current service cost.

24. How much is the deductible pension expense?

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Problem 4. Mr. Peterson reported the following income and expenses in 2024:

Compensation income 400,000

Gross income from business 500,000
Fully deductible contributions 50,000
Deductible contributions subject with limit 75,000
Other allowable deductions 200,000
Mandatory deduction and exempt income 75,000

25. Compute deductible contribution expense?

26. What is the taxable compensation income?

27. How much is the total taxable income?

Problem 5. Entertain Corporation set up plan in 2023. The following relate to the fund:
2023 2024
Current Service cost 400,000 400,000
Past Service Cost 300,000 200,000

28. Compute Deductible pension expense in 2023

29. 29. Compute Deductible pension expense in 2023

Problem 6. A taxpayer with Gross Receipts of 2,000,000 and Gross sales of 3,000,000 in
2024. It incurred Entertainment, Amusement and Recreational expense of 35,000.

30. Compute deductible EAR expense

Problem 7. 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

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

32. Compute the income tax due and payable

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Problem 8. 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

33. How Much is the inclusion from Gross income?

Problem 9. Herman had the following dealings in properties

Short term capital gain 200,000
Long term capital gain 300,000
Short term capital loss 500,000
Long term capital loss 150,000
Short term Ordinary gain 500,000
Long term ordinary gain 250,000

34. Compute Net capital Gain

35. Compute Net Capital Gain assuming the taxpayer is Domestic Corporation

Problem 10. A taxpayer received the following income

Compensation income 1,000,000

Gross Sales 2,000,000
Non-operating income 500,000
Cost of sales 300,000
Operating expenses 250,000

36. Compute income tax due and payable assuming he opted to used 8% tax rate

Problem 11. A taxpayer received the following income.

Gross Sales 2,000,000
Non-operating income 500,000
Cost of sales 300,000
Operating expenses 250,000

37. Compute income tax due and payable assuming he opted to used 8% tax rate.
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Problem 12.
Interest on loan from a Father used to finance a business 12,000

Interest on loan from a finance company used to build residence 5,000

Interest on loan obtained from sister and used for business 3,000
Interest on loan from lending institution used to buy Iphone 75 2,000
Interest for late payment of value-added tax 1,000
Interest on purchase price of residential lot bought in installments 900
Interest payment on a debt which has prescribed 6,000

38. Deductible interest expense

Problem 13.
Sales P 500,000
Sales Discounts, Returns and Allowances 20,000
Cost of Sales 230,000
Revenue 320,000
Rent Expense 36,000
Salaries and Wages 14,000
Interest expenses 12,000
Entertainment and Representation Expense 10,000
39. Total allowable itemized deductions

40. Taxable income