Instructions: Choose The BEST Answer For Each of The Following Items

CPAR
CPA Review School of the Philippines
FIRST PRE-BOARD EXAMINATION

TAXATION
Instructions: Choose the BEST answer for each of the following items.
1-12). Bobby, lessor, leased a lot to Christina, lessee, for 15 years beginning January 1, 2016, subject
to the following terms of and conditions:
Monthly rental ₱ 20,000

Advance rental for 2 years 480,000
Security deposit 240,000
Annual RPT to be paid by lessee 10,000
Cost of building constructed by

lessee (to be owned by lessor upon
termination of lease) ₱2,800,000
Building completed on July 1, 2018
Estimated life of building (in years) 20
1. Assuming the taxpayer uses the outright method. Determine the taxable income of lessor Bobby
for year 2016?
a. 480,000
b. 490,000
c. 3,280,000
d. 3,290,000
2. Determined the taxable income in year 2017?

a. 10,000
b. 240,000
c. 250,000
d. 1,410,000

a. 1,400,000
b. 2,800,000
c. 3,040,000
d. 3,050,000

a. 240,000
b. 250,000
c. 480,000
d. 500,000
(a) Under the Outright Method:

(a) ₱490,000; ₱10,000; ₱3,050,000; ₱250,000
(b) ₱490,000; ₱490,000; ₱3,050,000; ₱250,000
(c) ₱490,000; ₱10,000; ₱10,000; ₱250,000
(d) None of the above
(a) Outright Method
2016 2017 2018 2019
Rental - - 240,000 240,000
Advance rental (2 years) 480,000 - - -
Annual RPT paid by lessee 10,000 10,000 10,000 10,000
Income from leasehold
improvement - - 2,800,000 -
Total income 490,000 10,000 3,050,000 250,000
5. Assuming the taxpayer uses the spread out method. Determine the taxable income of lessor
Bobby for year 2016?
a. 480,000
b. 490,000
c. 3,280,000
d. 3,290,000

a. 10,000
b. 240,000
c. 250,000
d. 1,410,000

a. 42,000
b. 84,000
c. 282,000
d. 292,000
a. 240,000
b. 250,000
c. 292,000
d. 334,000
(b) Under the Spread-Out Method:

(a) ₱490,000; ₱10,000; ₱292,000; ₱334,000
(b) ₱490,000; ₱490,000; ₱0; ₱250,000
(c) ₱400,000; ₱10,000; ₱10,000; ₱250,000
(a) Spread-out Method

2016 2017 2018 2019
Rental - - 240,000 240,000
Advance rental (2 years) 480,000 - - -
Annual RPT paid by lessee 10,000 10,000 10,000 10,000
Income from leasehold
improvement - - 42,000 84,000
Total income 490,000 10,000 292,000 334,000
Schedule:
Cost of leasehold improvement 2,800,000
Less estimated accumulated depreciation
at the end of the lease:
(₱2.8 M/20 years) x 12.5 years (1,750,000)
Est. Book value, at the end of lease 1,050,000
Income from LHI per year:

₱1.05 M/12.5 years 84,000 per year
9. In preceding number, determine the deductible expense of Cristina, lessee, for 2016?
a. 240,000
b. 250,000
c. 362,000
d. 474,000
10. Determined expense of Cristina for 2017?

a. 10,000
b. 240,000
c. 250,000
d. 474,000

a. 240,000
b. 250,000
c. 362,000
d. 474,000

a. 240,000
b. 250,000
c. 362,000
d. 474,00
(a) ₱250,000; ₱250,000; ₱362,000; ₱474,000

(b) ₱250,000; ₱350,000; ₱474,000; ₱474,000
(c) ₱250,000; ₱250,000; ₱362,000; ₱362,000
2016 2017 2018 2019

Rental expense 240,000 240,000 240,000 240,000
RPT paid to lessor 10,000 10,000 10,000 10,000
Depreciation of LHI - - 112,000 224,000
Total deductible expense 250,000 250,000 362,000 474,000
Schedule:
Cost of LHI 2,800,000

Divided by shorter of:
(a) Useful life of LHI 20
(b) Remaining term of lease 12.5 12.5
Depreciation expense per year 224,000
13. One of the following represents taxable income:

a. Refund of overpaid rental expense in prior year
b. Refund of donors’ tax paid in prior year
c. Refund of income tax in prior year
d. Refund of special assessment paid in prior year
14.-17. The records of a domestic corporation, on the calendar year basis, organized in 2010, show
financial data for the following years:
2018 2019 2020 2021
Net Sales 3,925,000 4,810,000 5,939,000 6,945,000
Cost of sales 1,950,000 2,710,000 3,465,000 4,180,000
Business expenses including bad
debts written off 1,900,000 2,000,000 2,520,000 2,400,000
Other taxable income 25,000 100,000 26,000 35,000
Total assets 40,000,000 50,000,000 51,000,000 49,000,000
Recovery of bad debts written off:

In 2018 60,000
In 2019 10,000
14. The income tax payable for 2018?

a. 30,000
b. 35,000
c. 40,000
d. None of the above
15. The income tax payable 2019?

a. 78,000
b. 45,200
c. 68,000

a. 37,500
b. 27,500
c. 20,000
a. 100,000
b. 97,500
c. 78,000
d. 40,500
e. ₱ 30,000, ₱78,000, ₱0, ₱73,000

f. ₱ 40,000, ₱68,000, ₱37,500, ₱40,500
g. ₱ 58,500, ₱60,000, ₱18,000, ₱67,000
h. None of the above.
2018 2019 2020 2021

Net sales 3,925,000 4,810,000 5,939,000 6,945,000
Less: COGS (1,950,000) (2,710,000) (3,465,000) (4,180,000)
Gross income from
operations 1,975,000 2,100,000 2,474,000 2,765,000
Add: Other taxable income 25,000 160,000 26,000 45,000
Total gross income 2,000,000 2,260,000 2,500,000 2,810,000
Less: Itemized deductions (1,900,000) (2,000,000) (2,520,000) (2,420,000)
Net taxable income 100,000 260,000 (20,000) 390,000
RCIT (30% in 2018, 2019;

25% in 2020; 20% in 2021) 30,000 78,000 0 78,000
MCIT (2% in 2018, 2019;
1.5% in 2020; 1% in 2021) 40,000 45,200 37,500 28,100
Tax due (Higher of RCIT or

MCIT) 40,000 78,000 37,500 78,000
Less: Tax credits - (10,000) - (37,500)
Tax still due 40,000 68,000 37,500 40,500
EMCIT:
(2018-2021) 10,000
(2020-2023) 37,500
NOLCO:
(2020-2025) 20,000
18-20. KLM Corporation, a domestic corporation, had the following financial information for CY
2021: gross sales of ₱50 Million; cost of sales of ₱35 Million; and operating expenses of ₱12.6
Million, broken down as follows:
Cost of Sales
Direct materials ₱20,000,000
Direct labor 10,000,000
Manufacturing overhead 5,000,000
Total ₱35,000,000
Operating Expenses
Salaries and wages ₱5,000,000
Taxes 200,000
Depreciation 300,000
Professional fees 200,000
Advertising expenses 3,000,000
Training expenses 3,000,000
Office supplies 500,000
Interest expense 400,000
Total ₱12,600,000
The training expenses of ₱3,000,000 was incurred for its trainees enrolled in a specific skills
development program of TESDA. Moreover, the corporation earned interest income, net of the 20%
FT, in the amount of ₱100,000.
18. Assuming the corporation has complied with the withholding tax requirements on all its costs
and expenses subject to withholding tax, compute its allowable deduction:
a. 12,600,000
b. 14,100,000
c. 13,580,000
d. 13,575,000
19. Compute net taxable income for taxable year 2021?

a. 2,400,000
b. 1,425,000
c. 1,420,000
d. 900,000
20. Compute tax due/payable for year 2021?

a. 600,000
b. 355,000
c. 356,250
Gross sales 50,000,000
Less: Cost of sales (35,000,000)
Gross income 15,000,000
Less: Allowable deductions:
Operating expenses 12,600,000
Additional training expense deduction:
½ of training expense 1,500,000
Limit (10% of direct labor wages) 1,000,000 1,000,000
Less: 20% of interest
income subject to FT (25,000) (13,575,000)
Net taxable income 1,425,000
21-32. Christina, single, Filipino with 1 dependent child, received in taxable year 2020 the following
professional fees as an independent consultant:
Monthly Fees Less 5% CWT Net Monthly Fees
₱240,000 ₱12,000 ₱228,000
The monthly cost of her professional services amounted to ₱20,000, gross of the CWT.
The office rental expenses related to her consultancy business amounted to:
Monthly rental expense Less 5% CWT Monthly rental expense paid
₱30,000 ₱1,500 ₱28,500
She is not VAT-registered and instead pays 3% OPT on her gross receipts under Section 116 of
the Tax Code.
Aside from her consultancy business, she is a faculty member of CPAR University from which she
received the following employment income for the same year:
Gross pay Less CWT Less SSS premiums Net Pay
and union dues
₱850,000 ₱60,000 ₱6,000 ₱784,000
The amount she received from CPAR University is inclusive of 13th Month Pay and other
benefits of ₱165,000.
Her car fuel expenses amounted to ₱10,000 per month. She used the car for her consultancy
business 40% of the time.
She also wrote a book entitled “SINGLE LIFE IS HEAVEN” which became a bestseller in the
Philippines. In 2020, she earned royalties from the book in the amount of ₱2,500,000, net of the
10% final tax. Using this amount, she opened a time deposit with BDO which earned interest
income of ₱75,000, net of the 20% final tax.
She has excess tax credits from the prior year of ₱15,500.
21. Calculate her tax payable in the 1st Quarter of 2020?

a. 12,600
b. 48,600
c. 64,100
22. Calculate her tax payable in the 2nd quarter of 2020?
a. 211,840
b. 147,740
c. 111,740
23. Calculate her tax payable in the 3rd quarter of 2020?

a. 124,920
b. 248,420
c. 372,760
24. Calculate her tax payable in the annual ITR for 2020?
a. 777,872
b. 309,112
c. 369,112
1st Quarterly ITR 2nd Quarterly ITR 3rd Quarterly ITR Annual ITR
a) ₱12,600 ₱111,740 ₱124,920 ₱309,112
b) (₱10,500) ₱59,000 ₱28,000 ₱186,408
c) ₱10,500 ₱80,000 ₱7,500 ₱ 63,817
d) None of the above
1st Quarter 2nd Quarter 3rd Quarter
Gross receipts 720,000 720,000 720,000

Less: Cost of services (60,000) (60,000) (60,000)
Gross income from operations 660,000 660,000 660,000
Less: Itemized deductions:
Rental expense (90,000) (90,000) (90,000)
OPT paid (21,600) (21,600) (21,600)
Transportation/fuel expense (12,000) (12,000) (12,000)
Net income from operations 536,400 536,400 536,400
Add: Taxable income/(loss) from previous quarter - 536,400 1,072,800
Share in GPP net income - - -
Non-operating income - - -
Net taxable income 536,400 1,072,800 1,609,200
Tax (table) 64,100 211,840 372,760
Less Credits:
(1) Excess tax credits (15,500) (15,500) (15,500)
(2) Tax payments for previous quarters - (12,600) (124,340)
(3) CWT for previous quarters (Form 2307) - (36,000) (72,000)
(4) CWT for this quarter (Form 2307) (36,000) (36,000) (36,000)
Tax Payable 12,600 111,740 124,920
Annual
Gross compensation income 850,000
Less: Exempt compensation:
SSS premiums, Pag-ibig, and union dues (6,000)
13th month pay and other benefits (90,000)
Taxable Compensation income 754,000
Add: Income from business:
Gross receipts 2,880,000
Less: Cost of services (240,000)
Gross income from operations 2,640,000
Less: Itemized deductions:
Rental expense (360,000)
OPT paid (86,400)
Transportation/fuel expense (48,000)
Net income from operations 2,145,600
Add: Non-operating income -
Share in GPP net income - 2,145,600
Total taxable income 2,899,600
Tax (table) 777,872
Less Credits:
(1) Excess tax credits (15,500)
(2) Tax payments for previous quarters (249,260)
(3) CWT for previous quarters (Form 2307) (108,000)
(4) CWT for this quarter: Form 2307 (36,000)
Form 2316 (60,000)
Tax Payable 309,112
25. Calculate her tax payable in the 1st quarter if she chooses OSD (Optional Standard Deduction)?
a. Zero
b. (13,500)
c. 38,000
d. 10,434
26. Calculate her tax payable in the 2nd quarter if she chooses OSD (Optional Standard Deduction)?
a. 149,200
b. 97,700
c. 61,700
d. 48,200
27. Calculate her tax payable in the 3rd quarter if she chooses OSD (Optional Standard Deduction)?
a. 93,600
b. 201,600
c. 263,300
d. 278,800
28. Calculate her tax payable in the annual ITR if she chooses OSD (Optional Standard Deduction)?
a. 644,240
b. 628,740
c. 473,440
d. 269,440
1st Quarterly ITR

29. 2nd Quarterly ITR 3rd Quarterly ITR Annual ITR
a) ₱0 ₱61,700 ₱93,600 ₱269,440
b) ₱0 ₱23,595 ₱24,343 ₱34,453
c) ₱10,434 ₱80,348 ₱7,534 ₱234,555
Annual
Add: Income from business:
Less: Cost of services (0 if OSD) 0
Gross income from operations 2,880,000
Less: OSD (40%) (1,152,000)
Net income from operations 1,728,000
Share in GPP net income - 1,728,000
Total taxable income 2,482,000
Tax (table) 644,240
Less Credits:
Form 2316 (60,000)
Tax Payable 269,440
1st Quarter 2nd Quarter 3rd Quarter
Gross receipts 720,000 720,000 720,000

Less: Cost of services - 0 if OSD 0 0 0
Gross income from operations 720,000 720,000 720,000
Less: OSD (40%) (288,000) (288,000) (288,000)
Net income from operations 432,000 432,000 432,000
Add: Taxable income/(loss) from previous quarter - 432,000 864,000
Share in GPP net income - - -
Non-operating income - - -
Net taxable income 432,000 864,000 1,296,000
Tax (table) 38,000 149,200 278,800
Less Credits:
(2) Tax payments for previous quarters - 0 (61,700)
(3) CWT for previous quarters (Form 2307) - (36,000) (72,000)
(4) CWT for this quarter (Form 2307) (36,000) (36,000) (36,000)
Tax Payable 0 61,700 93,600
29. Calculate her tax payable in the 1st Quarter if she avails of the 8% income tax option.
a. 57,600
b. 21,600
c. 6,000
30. Calculate her tax payable in the 2nd quarter if she avails of the 8% income tax option.
a. 115,200
b. 27,700
c. 21,000
31. Calculate her tax payable in the 3rd quarter if she avails of the 8% income tax option.
a. 172,800
b. 49,300
c. 21,600
32. Calculate her tax payable in the annual ITR if she avails of the 8% income tax option.
a. 348,900
b. 176,100
c. 80,100
1st Quarterly ITR 2nd Quarterly ITR 3rd Quarterly ITR Annual ITR
a) ₱6,100 ₱21,600 ₱21,600 ₱80,100
b) ₱0 ₱23,595 ₱24,343 ₱86,483
c) ₱10,434 ₱80,348 ₱7,534 ₱234,455
Solution below:
1st Q 2nd Q 3rd Q

Gross receipts in quarter 720,000 720,000 720,000
Add: Non-operating income - - -
Total income for the quarter 720,000 720,000 720,,000
Add: Total income from previous quarters - 720,000 1,440,000
Cumulative taxable income as of this quarter 720,000 1,440,000 2,160,000
Less: Amount allowed as deduction - - -
Taxable Income 720,000 1,440,000 2,160,000
Tax rate (8%) 8% 8% 8%
Tax due 57,600 115,200 172,800
Less tax credits:
(2) CWT Withheld (36,000) (72,000) (108,000)
(3) Taxes paid in previous quarters - (6,100) (27,700)
Tax still due or tax payable 6,100 21,600 21,600
Annual
Tax (table) 118,500
Add: Tax on business income

Total Income 2,880,000
Less: ₱250,000; 0 if mixed income earner 0
Taxable income (loss) 2,880,000
Tax (8%) 230,400
Total Tax Due 348,900
Less Credits:
Form 2316 (60,000)
Tax Payable 80,100
Taxable income (PHP)
Tax on column 1 (PHP) Tax on excess (%)
Over Not over
0 250,000 - 0
250,000 400,000 - 20
400,000 800,000 30,000 25
800,000 2,000,000 130,000 30
2,000,000 8,000,000 490,000 32
8,000,000 2,410,000 35
33. Statement 1: Provisions in the Philippine Constitution on Taxation are grants of power.
Statement 2: Due process of law in taxation in the Constitution is a grant of power.
a. If only the first statement is correct.
b. If only the second statement is correct.
c. If both statements are correct.
d. If both statements are incorrect.
34. Statement 1: An excise tax is also called privilege tax.

Statement 2: A tax which is neither personal nor property, is an excise tax.
35. Statement 1: Estate tax is a proportional tax.

Statement 2: A progressive tax is a tax, the rate of which is directly proportional to tax base.
\

36. Statement 1: Taxation without representation is not tyranny.

Statement 2: In the exercise of taxation, the state can tax anything at any time and at any amount.
37. Statement 1: Taxation and power of Eminent Domain may be exercised simultaneously.
Statement 2: Taxation and Police Power may be exercised simultaneously.
38. Statement 1: All of our tax laws are statutory laws.
Statement 2: The non-impairment clause is a statutory law on taxation.
39. Statement 1: Non-payment of tax makes the business illegal.

Statement 2: The non-payment of license fee makes the business illegal.
40. Statement 1: Margin fee is a tax.

Statement 2: Custom’s duty is a tax.
41. Statement 1: A tax may include the power to destroy.

Statement 2: A tax may be imposed violating uniformity of taxation.
42. Statement 1: Territoriality is one of the constitutional limitations on the power of taxation.
Statement 2: International comity is an inherent limitation in taxation.
43. Statement 1: Taxes may be used for sectarian purposes if allowed by an ordinance.
Statement 2: The President can refuse to implement a tax law if it appears to be unconstitutional.
44. Statement 1: There can be double taxation in the Philippines.

Statement 2: Double taxation is illegal if it violates the uniformity of taxation.
45. Statement 1: A progressive system of taxation means a tax structure where the tax base increases
as the tax rate increases.
Statement 2: Tax exemption is a grant of immunity to a particular taxpayer from tax where others
are obliged to pay.
46. Statement 1: Tax avoidance is a form of tax escape.
Statement 2: Tax evasion is not punishable.
47. C, an American singer, was engaged to sing for one week at the Western Philippine Plaza after
which she returned to USA. For income tax purposes, she shall be classified as:
a. Resident alien.
b. Nonresident alien engaged in trade or business.
c. Nonresident alien not engaged in trade or business.
d. Resident citizen.
48. Situs of taxation is world/global taxation?

a. Resident citizen.
b. Resident alien.
c. Nonresident citizen.
d. Nonresident alien.
49. It is important to know the source of income for tax purposes (i.e. from within and without the
Philippines) because:
a. Some individuals and corporate taxpayers are taxed on their worldwide income while
others are taxable only upon income from sources within the Philippines.
b. The Philippine imposes income tax only on income from sources within.
c. Some individual taxpayers are citizens while others are aliens.
d. Export sales are not subject to income tax.
50. To record MCIT, the account deferred charges MCIT is:

a. Debited c. Memo entry only
b. Credited d. No entry required
51. To record application of excess MCIT vs. NORMAL income tax, what account is credited:
a. Income tax payable c. Retained earnings
b. Cash in bank d. Deferred charges MCIT
52. To record expired portion of MCIT, what account is debited:

a. Retained earnings c. Deferred charges MCIT
b. Income tax payable d. Provision for income tax
53. To be allowed as a valid deduction, charitable and other contribution must not exceed:
a. 5% of taxable income after charitable contribution, income of individuals
b. 10% of taxable income after charitable contribution, in case of individuals
c. 5% of taxable income before charitable of contribution, in case of individuals.
d. 10% of taxable income before charitable contribution, in case of individuals.
54. 1st Statement - The allowable deduction for pension payments to employees will only apply to
those pension plan that is funded.
2nd Statement - The pension trust deduction is composed of the past service cost and the present
service cost.
a. True; False c. False; True
b. True; True d. False; False
55. SFI Inc, (SFI) has been in business for the past 10 years. For the year 2022, it decided to establish
a pension fund for its employees. The pertinent data of the fund are us follow:
Past Service Cost (lump sum payment) P1,000,000
Present Service Cost 100,000
How much allowable deduction for pension cost SFI could claim?
a. P1,000,000 c. P 200,000
b. P1,100,000 d. P 100,000
56. Assuming the same facts in the preceding number, the allowable deduction of SFI for pension after
10 years:
a. P1,000,000 c. P 200,000
b. P1,100,000 d. P 100,000
57. Mr. R was retired by his employer corporation and paid P1,000,000 as a retirement gratuity without
any deduction for withholding tax. The corporation became bankrupt the following year. Can the
BIR subject the P1,000,000 retirement gratuity to income tax?
1st Answer: Yes, if the retirement gratuity was paid based on a reasonable pension where Mr. R
was 50 years old and has served the corporation for more than 10 years.
2nd Answer: No, If Mr. R was forced by the corporation to retire beyond Mr. R’s control.
a. Both answer are wrong
b. Both answer are correct
c. 1st answer is correct, 2nd answer is wrong
d. 1st answer is wrong, 2nd answer is correct
58. A store in the Cartimar market in Pasay City was discovered by the BIR agents selling luxury
items worth P500,000.00 suspected to have been smuggled into the country by the storeowner.
May the Commissioner of Internal Revenue put under “preventive embargo” said luxury items?
a. Yes, it is like constructive distraint.
b. Yes, because of anti-smuggling law.
c. No, violative of search and seizure clause of the Constitution.
d. No, violative of the due process clause of the Constitution.
59. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue,
issued a Revenue Regulation using gross income as the tax base for corporations doing business
in the Philippines. Is the Revenue Regulation valid?
a. Yes, the Secretary of Finance has the power to issue rules and regulations.
b. Yes, gross income taxation over corporations is valid.
c. No, Secretary of Finance has virtually amended the NIRC.
d. No, only the Commissioner of the BIR has the authority to make revenue rules and
regulations.
60. A suit questioning the validity of a tax statute or law is:

a. Taxpayer’s suit
b. Derivative suit
c. Class suit
d. Representative suit
61. 1st Statement: Internal revenue laws are civil in nature. They are not political and as such were
continued in force during the period of enemy occupation and in effect were actually enforced by
the occupation government, such tax laws being deemed to be laws of the occupied territory and
not of the occupying enemies. Hence, when the Japanese imperial government occupied the
Philippines in world war 2 it may continue collecting Philippines taxes.
2nd Statement: Internal revenue laws are not penal in nature; thus the principle of ex post facto
does not apply to them; however, for violations of the internal revenue laws penalties may be
provided.
62. 1stStatement: Real property is subject to taxation in the place in which it is situated regardless of
whether the owner is a resident or a non-resident therein. Rule of Lex Rae Sitae.
2nd Statement: As far as personal property is concerned. The ancient rule of mobilia sequntur
personam applies. This means that the thing follows the law of the owner thereof.
63. 1st Statement – The BIR is authorized to collect estate tax deficiency through the summary
remedy of levying upon and sale of real properties of a decedent, without the cognition and
authority of the court.
2nd Statement – The CIR may examine the bank records of the deceased in order to determine
the latter’s taxable net estate.
64. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under the Tax Code or
other laws is vested with
a. The Commissioner of Internal Revenue, subject to the exclusive appellate jurisdiction of
the Court of Tax Appeals;
b. The Secretary of Finance, subject to the review of Office of the President;
c. The Court of Tax Appeals, subject to the exclusive appellate jurisdiction of the Supreme
Court;
d. The Regular Courts, subject to exclusive appellate jurisdiction of the Court of Tax Appeals.
65. The power to interpret the provisions of National Internal Revenue Code and other tax laws shall
be under the exclusive and original jurisdiction of the
a. The Commissioner of Internal Revenue, subject to the review by the Secretary of
Finance
b. The Commissioner of Internal Revenue, subject to the exclusive appellate jurisdiction of the
Court of Tax Appeals;
c. The Court of Tax Appeals, subject to the exclusive appellate jurisdiction of the Court of
Appeals
d. The Regular Courts, subject to the review by the Court of Tax Appeals.
66. It is the official action of an administrative officer in determining the amount of tax due from a
taxpayer, or it may be a notice to the effect that the amount stated therein is due from the
taxpayer with a demand for payment of the tax or deficiency stated therein
a. Tax investigation
b. Tax assessment
c. Tax audit
d. Tax mapping
67. What are the means employed in the assessment of taxes, EXCEPT?
a. Examination of tax returns
b. Inventory taking surveillance and use of presumptions gross sales or receipts
c. Prescription of real property values
d. Examination of bank deposits
68. 1stStatement: The Commissioner, the Deputy Commissioners, the Revenue Regional Directors,
the Revenue District Officers and other internal revenue officers shall have authority to make
arrest and seizures for the violation of any penal law, rule or regulation administered by the
Bureau of Internal Revenue pursuant to the Tax Code.
2nd Statement: An internal revenue officer assigned to establishments where articles subject to
excise tax are produced or kept shall in no case stay in his assignment for more than two (2)
years.
a. True, False c. False, True
b. True, True d. False, False
69. Although the power of taxation is basically legislative in character, it is NOT the function of the
Congress to:
a. Fix with certainty the amount of taxes
b. Collect the tax levied under the law
c. Identify who should collect the tax
d. Determine who should be subject to the tax
70. A corporation may change its taxable year to calendar or fiscal year in filing its annual income
tax return, provided
a. It seeks prior BIR approval of its proposed change in the accounting period.
b. It simultaneously seeks BIR approval of its new account period immediately after the close of
the taxable year.
c. It should change its accounting period two years prior to changing its taxable year.
d. Its constitution and by-laws authorizes the change.
The End

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CPAR

CPA Review School of the Philippines

FIRST PRE-BOARD EXAMINATION

Monthly rental ₱ 20,000

Cost of building constructed by

2. Determined the taxable income in year 2017?

3. Determined the taxable income in year 2018?

4. Determined the taxable income in year 2019?

(a) Under the Outright Method:

6. Determined the taxable income in year 2017?

7. Determined the taxable income in year 2018?

(b) Under the Spread-Out Method:

(a) Spread-out Method

Income from LHI per year:

10. Determined expense of Cristina for 2017?

11. Determined expense of Cristina for 2018?

12. Determined expense of Cristina for 2019?

(a) ₱250,000; ₱250,000; ₱362,000; ₱474,000

2016 2017 2018 2019

Cost of LHI 2,800,000

(a) Useful life of LHI 20

(b) Remaining term of lease 12.5 12.5

Depreciation expense per year 224,000

13. One of the following represents taxable income:

Recovery of bad debts written off:

14. The income tax payable for 2018?

15. The income tax payable 2019?

16. The income tax payable for 2020?

e. ₱ 30,000, ₱78,000, ₱0, ₱73,000

2018 2019 2020 2021

RCIT (30% in 2018, 2019;

Tax due (Higher of RCIT or

19. Compute net taxable income for taxable year 2021?

20. Compute tax due/payable for year 2021?

21. Calculate her tax payable in the 1st Quarter of 2020?

23. Calculate her tax payable in the 3rd quarter of 2020?

1st Quarter 2nd Quarter 3rd Quarter

Gross receipts 720,000 720,000 720,000

1st Quarterly ITR

Gross receipts 720,000 720,000 720,000

1st Q 2nd Q 3rd Q

Add: Tax on business income

400,000 800,000 30,000 25

800,000 2,000,000 130,000 30

2,000,000 8,000,000 490,000 32

34. Statement 1: An excise tax is also called privilege tax.

35. Statement 1: Estate tax is a proportional tax.

a. If only the first statement is correct.

36. Statement 1: Taxation without representation is not tyranny.

39. Statement 1: Non-payment of tax makes the business illegal.

40. Statement 1: Margin fee is a tax.

41. Statement 1: A tax may include the power to destroy.

44. Statement 1: There can be double taxation in the Philippines.

48. Situs of taxation is world/global taxation?

50. To record MCIT, the account deferred charges MCIT is:

52. To record expired portion of MCIT, what account is debited:

60. A suit questioning the validity of a tax statute or law is:

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