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Name: - : Multiple Choice Exercises
Name: - : Multiple Choice Exercises
Section: ___________________________________
2. Statement 1: Exclusions are receipts which are excluded from the gross income, hence, do not form
part of the gross income.
Statement 2: Exclusions are items or amounts allowed to be subtracted from gross income to arrive at
the taxable income.
Statement 3: Deductions from gross income are not presumed.
a. Only statements 1 and 3 are false
b. Only statement 2 is false
c. Only statement 1 and 2 are true
d. All statements are true
3. Statement 1: The taxpayer has the burden of justifying the allowance of any deduction claimed.
Statement 2: Deductions are strictly construed against the government.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
4. Statement 1: Revenue expenditures are period costs that are related to a particular period of time of
business operation.
Statement 2: Capital expenditures are nonrecurring expenditures related to acquisition of depreciable
assets to be used in the business.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
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c. Pension and compensation for injuries if compensated for by insurance.
d. Grossed-up monetary value of fringe benefits provided that the final tax imposed has been paid.
7. Brianne Corporation has incurred rent expense amounting to P500,000. Brianne paid the lessor the
gross amount of P500,000 without deducting 5% withholding tax. How much rent can Brianne claim
as allowable deduction from its gross income?
a. P500,000 c. P475,000
b. P450,000 d. nil
8. RRO Corporation is engaged in the sale of goods and services with net sales/net revenue of
P3,000,000 and P2,000,000 respectively. The actual entertainment, amusement and recreational
(EAR) expense for the taxable year totalled P30,000.
How much is the deductible EAR expense?
a. P30,000 c. P25,000
b. P27,000 d. nil
10. In the conduct of his business in 2013, Modesto found it necessary to give gifts to the government
officials with whom he had official dealings.
a. These gifts are deductible expenses subject to the substantiation rule.
b. The value of the gifts, if de minimis, are allowed to be deducted.
c. Irrespective of the value, the gifts are considered as bribes and not allowed to be deductible.
d. These gifts are deductible if found to be necessary and properly supported by receipts.
11. Roy borrowed money from the Bank amounting to P1,000,000 at an annual interest rate of 7%. He
invested the money in deposit substitutes earning annual interest income of 8%. How much is the
deductible interest?
a. P43,600 c. P70,000
b. P26,400 d. P80,000
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15. All of the following, except one, are requisites in the carry-over of net operating loss:
a. There must be no substantial change in the ownership of the business
b. Carry-over is not allowed if the corporation is subject to MCIT during the taxable year
c. Even if the corporation paid MCIT, the running of the prescriptive period is not interrupted.
d. The carry-over is good for one (1) year.
16. When shall bad debts be allowed as deduction from gross income?
a. Upon setting up of allowance for doubtful accounts
b. Upon write-off in the books
c. At the option of the taxpayer, upon setting up of allowance or upon write-off
d. At the option of the government, upon setting up of allowance or upon write-off
18. A retailer of goods has gross sales of P1,000,000 with a cost of sales amounting to P800,000.
Assuming that the taxpayer is an individual and opted to claim optional standard deduction, how
much is the taxable income?
a. P600,000 c. P120,000
b. P550,000 d. P80,000
19. A retailer of goods has gross sales of P1,000,000 with a cost of sales amounting to P800,000.
Assuming that the taxpayer is a corporation and opted to claim optional standard deduction, how
much is the taxable income?
a. P600,000 c. P120,000
b. P550,000 d. P80,000
This study source was downloaded by 100000838973892 from CourseHero.com on 12-14-2021 19:14:56 GMT -06:00
https://www.coursehero.com/file/60529974/zzzz-Homework-Deduction-from-Gross-Income-NAdocx/
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