Assumption College of Nabunturan Final Exam Tax1

Name: EJIE L. MARABE_____________________ Course/yr.: ____BSOA-3_________ Schedule: ____MTW

10:00-11:00__________

Test I. Theory question

Instruction: Encircle the letter of your answer.
1. Which of the following is taxable? B
a. Lotto Winnings
b. Prize exceeding P10,000
c. Gain on sale of 10-year bond
d. Interest on long-term deposit on Investment

2. Which of the following items that reduce salaries of employees is not an exclusion from gross income?
D
a. IOU’s
b. PHIC contribution
c. HDMF contribution
d. GSIS or SSS contribution
3. Partnership is formed by persons for the sole purpose of exercising their common profession, no part of
the income of which is derived from engaging in any trade or business. B
a. Joint venture
b. General professional partnership
c. Trading partnership
d. Joint accounts

4. Which statement is wrong? Fringe benefit tax is? C

a. Withheld at source
b. Impose on the employer
c. Impose on the employee
d. Deductible by the employer
5. Mean all employee who are holding neither managerial nor supervisory position . A
a. Officers
b. Managerial employees
c. Supervisory employees
d. Rank-and-file employees
6. Lots being rented when subsequently sold are classified as. C
a. Liquid assets
b. Fixed assets
c. Capital assets
d. Ordinary assets
7. What Republic Act is the TRAIN Law? D
a. 10965
b. 10967
c. 10960
d. 10963
8. What Republic Act is the National Internal Revenue Code of 1997. A
a. 8424
b. 8474
c. 8560
d. 8565

9. The employer subject to the fringe benefit tax may be a/an? D

a. Corporation
b. Individual
c. Professional partnership
d. All of the above
10. A general professional partnership is not subject to income tax but is required to file returns of its
income. D
a. True
 b. False
c. Answer not given
d. It depends on the GPP if they file the tax return or not.

11. A general professional partnership is exempt from income tax, but it is required to file an income tax
return. B
a. For statistical purposes
b. Because the net income of the partnership will be traced into the income tax return of the partners
c. Because all income earners are required to file income tax return.
d. None of the above

12. Statement 1: All partnerships are taxed in the same manner as corporation.
Statement 2: The income of a general commercial partnership is also subject to MCIT or Regular
Corporate Income Tax whichever is applicable. C
a. Statement 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is false
d. Statement 1 & 2 are true

13. Which of the following statements is wrong? A

a. A general partnership in trade is not taxable as a corporation.
b. A joint venture for undertaking construction projects is not taxable as a corporation
c. A consortium for energy operations pursuant to an operating consortium agreement under a service
contract with the government is not taxable as a corporation.
d. A co-ownership where the activities of the co-owners are limited to the preservation of property and
collection of income from the property is not taxable as a corporation.

14. The partner’s share in the profits of a general professional partnership is regarded as received by the
partners by the partners although not yet distributed. This concept of income reporting under the Tax
Code is known as: C
a. Installment basis of reporting income
b. Accrual basis of reporting income
c. Constructive receipt basis of reporting income
d. Hybrid method of reporting income

15. Which of the following is a requisite for an income to be taxable? D

a. There must be gain
b. The gain must be realized or received
c. The gain must not be excluded by law from taxation
d. All of the above

16. Which of the following is not an income for income tax purposes. D
a. Gain derived from labor
b. Return on capital
c. Excess of selling price over cost of assets sold
d. Gift received

17. Which of the following is not a characteristics of income ? D

a. Increase in taxpayer’s wealth
b. Realization or receipt of gain
c. Earnings constructively received
d. Return of taxpayer’s wealth

18. Which is not a valid definition of income? B

a. Income is the return from capital invested.
b. Income is a fund at one distinct point of time
c. Income means all wealth which flows into the taxpayer other than a mere return of capital
d. Income means cash or its equivalent unless otherwise specified
 19. Which of the following is NOT true about source of income? A
a. In case of income derived from labor, source is the place where the labor is performed.
b. In case of income derived from use of capital, source is the place where the capital is employed
c. In case of profits from the sale or exchange of capital assets, source is the place or transactions
occurs.
d. None of the above.

20. Which of the following is not a characteristic of a deduction? C

a. It is a reduction of wealth that helped earn the income subject to tax.
b. An immunity or privilege, a freedom from a charge or burden to which others are subjected
c. It is not a receipt
d. It is a subtraction to arrive at income subject to tax

21. In cases of deductions and exemptions on income tax returns, doubts shall be resolved. C
a. Strictly against the taxpayer
b. Strictly against the government
c. Liberally in favor of the taxpayer
d. Liberally in favor of the employer

22. Which of the following is a deductible expense for income tax purposes? B
a. Salaries of domestic servants
b. Ordinary repair of the personal car
c. Provision for doubtful accounts
d. None of the above

23. This is not a requisite for business expense to deductible. C

a. It must be reasonable
b. It must be paid during the taxable year
c. The withholding tax otherwise required have been deducted and remitted to the BIR
d. It must be ordinary and necessary

24. Which of the following is not deductible from gross income? D

a. Salaries and wages of employees
b. Entertainment, amusement and recreation expenses
c. Rental expenses
d. Bribes, kickbacks and other similar payments

25. Which of the following is allowable expenses of an employer. B

a. Tax withheld by a corporation from its employees salary
b. Kickback payment to a government official
c. Distribution of profits to partners
d. None of the above

Test II. Problem Solving

Instruction: Encircle the letter of your answer and show your solutions.
Mabilisang Gupit Reyes. received the following benefits from his employer in December 2014.

Thirteenth Month pay 50,000

Christmas bonus 10,000

Productivity incentives pay 16,000

1. The taxable compensation income is. A

a. 76,000 c. 16,000
b. 46,000 d. 2,000

Horn JB., a sole proprietor, has the following data in 2014, its first year of merchandising:

Gross sales 300,000

 Cost of goods sold 150,000

Other Income (Non-Operating) 50,000

Selling expenses 20,000

Depreciation Expense 4,000

2. How much is Horn’s gross operating income? B

a. 300,000 c. 200,000
b. 150,000 d. 224,000

3. How much is the Horn’s Net Income? A

a. 176,000 c. 76,000
b. 126,000 d. 80,000

For the taxable year 2014, Jemskie and Kenskie, partners of a general professional partnership agreed to
divide profits and losses 60:40, respectively. Both are married without qualified dependents. The following are
the details of the accounts:

Sale of services, GPP 2,450,000

Cost of Services, GPP 720,000

Operating Expenses, GPP 580,000

4. The distributable net income of the GPP, assuming that the GPP used Itemized deductions? A
a. 1,730,000 c. 1,470,000
b. 1,870,000 d. 1,150,000

5. The distributable net income of the GPP, assuming that the GPP used optional standard deductions?
D
a. 1,038,000 c. 1,122,000
b. 690,000 d. 1,470,000

6. Using the Itemized deduction, how much is the tax due of the GPP? A
a. 345,000 c. 0
b. 315,000 d. 367,500

Assume that Mr. Zorro acquired a machine at a cost of P7,600,000 with no salvage value. The useful life of the
machine is estimated to be 25 years.

7. Assuming the straight-line method was used, the annual depreciation of the machine is . C
a. 301,000 c. 304,000
b. 303,000 d. 380,000

8. Assuming that at the end of the 20 th year, it was determined that the machine has 10 more years of
useful life, how much shall be the depreciation expense from the 21st year to the 30th year? B
a. 149,000 c. 151,000
b. 150,000 d. 152,000

9. Assume further that instead of the machine having 10 more years of life, it only has 2 years what is the
depreciation expense for the remaining two years? B
a. 730,000 c. 750,000
b. 740,000 d. 760,000
For item 10-13:
Mr. Ken, a minimum wage earner, works for Ipadrugtes ng masigurado lnc. He is not engaged in business nor
has any other source of income other than his employment. For 2018, Mr. Ken earned a total compensation
income of P 135,000.00. (Train law)

10. The taxpayer contributed to the SSS, Philhealth, and HDMF amounting to P4, 000.00 and has received
13th month pay of P9, 000.00. How much is the taxable Income? B
a. 122,000 c. 126,000
b. 135,000 d. 131,000

11. The taxpayer contributed to the SSS, Philhealth, and HDMF amounting to P5, 000.00 and has received
13th month pay of P11, 000.00. How much is the tax due? A
a. 27,000 c. 0
b. 23,800 d. 8,100

12. The following year, Mr. Ken earned, aside from his basic wage, additional pay of P170,000.00 which
consists of the overtime pay P90,000.00, night shift differential- F40,000'00, hazard pay P20,000.00
and holiday pay P20,000.00. Also the taxpayer contributed to the SSS, Philhealth, and HDMF
amounting to P5, 000.00 and has received 13th month pay of P11, 000.00. How much is the taxable
Income? C
a. 7,800 c. 11,000
b. 0 d. 45,000

13. The following year, Mr. Ken earned, aside from his basic wage, additional pay of P140,000.00 which
consists of the overtime pay P80,000.00, night shift differential- F30,000'00, hazard pay P15.000.00
and holiday pay P15,000.00. Also the taxpayer contributed to the SSS, Philhealth, and HDMF
amounting to P5, 000.00 and has received 13th month pay of P11, 000.00. How much is the tax due? C
a. 1,800 c. 5,000
b. 0 d. 8,200

Ms. BB operates a convenience store while she offers bookkeeping services to her clients. In 2018, her gross
sales amounted to P800, 000.00, in addition to her receipts from bookkeeping services of P300, 000.00. She
already signified her intention to be taxed at 8% income tax rate in her 1st quarter return. (train law)

14. How much is the taxable income? A

a. 800,000 c. 500,000
b. 300,000 d. 850,000

15. How much is the tax due? B

a. 88,000 c. 78,000
b. 68,000 d. 108,000

For item 16-17

Nagdudroga ka ba Poultry employs the cash basis of accounting for its poultry business. For the taxable year 2016,
it has the following data:
Cash sales on livestock raised 500,000

Sales of livestock purchased 250,000

Cost of Sales 300,000

Other Income (Non-operating) 100,000

16. How much is the operating gross income? C

a. 550,000 c. 750,000
b. 450,000 d. 850,000

17. How much would be the taxable income? B

a. 550,000
b. 650,000 d. 500,000
c. 450,000
Test III. Problem Solving. Situational.

Individuals Earning Purely Compensation Income

CASE I. Mr. Ihong, a worker for G.O.D., Inc. He is not engaged in business nor
earned a total compensation income of P335,000.00 with non taxable benefits of P15,000.00.

How much is the tax liability of Mr. Ihong?

Total Compensation Income P 335,000
Less: Non-Taxable benefits  15,000

Taxable Income  320,000

Tax Due  14,000

CASE II. Mr. Macly, who also works for G.O.D., Inc. He is not engaged in business nor
earned a total compensation income of P318,000.00 with non taxable benefits of P22,000.00.

How much is the tax payable of Mr. Macly?

318,000
Total Compensation Income P 22,000
Less: Non-Taxable benefits  

Taxable Income  296,000

Tax Due  9,200

             

Self-Employed Individuals Earning Income Purely from

Self-Employment or practice of Profession

CASE 1. Ms. Samson operates a convenience store while she offers bookkeeping services to her clients.
In 2018, her gross sales amounted to P1,000,000.00, in addition to her receipts from bookkeeping
services of P300,000.00. She already signified her intention to be taxed at 8% gross income tax rate
in her 1st quarter return.

How much is her tax liability?

Gross Sales - Convenience Store P 1,000,000

Gross Receipts - Bookkeeping  300,000
Total Sales/Receipts 1,300,000
Less: Amount allowed as Deduction  250,000
Taxable Income  1,050,000

Tax Due  84,000

CASE II. Ms. Datu-Pution, failed to signify her intention to be taxed at 8% fross income tax rate on her
initial Quartely Income Tax Return, her gross income is P1,700,000.00 and she incured cost of sales and
operating expenses amounting P300,000.00 and P200,000.00. respectively or a total of P500,000.00

How much is her tax liability?

Gross Sales/Receipts P 1,700,000

Less: Cost of Sales  300,000
Gross Income 1,400,000
Less: Operating Expenses  200,000
Taxable Income  1,200,000

Tax Due  120,000

CASE III. Ms. Ganda, opted to be taxed using the Graduated Rates under the Optional Standard Deduction on her
initial Quartely Income Tax Return, her Gross Receipts is P1,700,000.00 and she incured cost of sales and
operating expenses amounting P500,000.00 and P250,000.00. respectively or a total of P750,000.00

How much is her tax liability?

Gross Sales/Receipts
Less: Optional Standard Deduction  
Taxable Income  

Tax Due  

             

Individual Earning Income Both from Compensation and from Self-employment

(business or practice of profession)

CASE I. Mr. MAG, a Financial Comptroller of JAB Company, earned annual compensation in 2018 of P1,400,000.00
with non taxable benefits of P60,000. Aside from employment income, he owns a convenience store , with
gross sales of P2,200,000. His cost of sales and operating expenses are P1,000,000.00 and P600,000.00.
Mr. MAG opted for 8% Gross Income Tax.

How much is the tax liability of Mr. Mag?

On Compensation:
Total Compensation Income P
Less: Non-Taxable benefits  
Taxable Income  

Tax Due on Compensation Income  

Case III. Compute the tax of Mr. MAG using Graduatued

On Business Income: Total Compensation Income

Gross Sales Less: Non Taxable Benefit
Less: Amount allowed as Deduction Total Compensation Income
Taxable Income Add: Taxable Income from Business
Gross Sales/Receipts
Tax Due Less: Cost of Sales
Gross Income
Total Income Tax Due (Compensation and Business) Less: Operating Expenses
Taxable Income
Case II. Compute the tax of Mr. MAG using Graduatued Tax Rates under Optional Standard Deduction Method
Total Taxable Income (Compensation and Business)
Total Compensation Income
Less: Non Taxable Benefit Tax Due
Total Compensation Income
Add: Taxable Income from Business
Gross Sales/Receipts
Less: Optional Standard Deduction End of exam…..God bless you.
Taxable Income from business

Total Taxable Income (Compensation and Business)

Tax Due