IRA Exercise No.

3: Fringe Benefits Tax

Individual Readiness Applied Exercise

 This activity allows you to apply tax laws, concepts, and principles.
 Should there be answers or items that you are unsure of or is a product of guesswork, it is
encouraged that you raise your queries or concerns. Use our VLE My Private Safe Space, social
forum, chat messaging, or by calling, texting, or sending an email.

A. A sole proprietor had the following expenses during the taxable year:
Plane ticket, first-class foreign travel of the manager to Canada for
attending seminar as supported with documents $ 3,500
Meals and lodging allowance for 6 days travel of manager $ 3,000
Plane ticket, economy class foreign travel of the supervisor to Singapore
for business purpose $ 1,200
Meal and lodging allowance for 3 days travel of the supervisor
o Singapore $ 1,500
Domestic travel of company’s officials P400,000
All foreign travels were supported with the necessary documents. The exchange rate is $1:P50.
Compute:
1. Value of fringe benefits subject to final tax.
2. Total allowable travel expenses

B. Mr. Lando, a self-employed individual, provided the following data during the 2018 taxable year:
Gross sales from business 2,880,000
Rental income on machinery 252,000
Interest income on bank deposit in the Philippines 54,000
Local travel expenses paid by the company for the travel
of the managers and members of their families 378,675
De minimis benefits to all employees 72,000
Company contributions to the employees’ retirement,
Insurance and hospitalization benefit plan 108,000
1. Total value of fringe benefits
2. Grossed up monetary value of fringe benefits
3. Fringe benefit tax

C. Gary, the chairman of the board, presented the following expense accounts paid by Lane
Corporation:
Monthly representation allowance 30,600
Grocery items 17,000
Pants and t-shirts 3,400
The fringe benefit tax would be.

D. For the year 2018, Mitch Valdez, a dean of college, received from her employer an educational
benefit with cash value of P65,280.
a. The fringe benefit tax is.
b. The operating expense allowed as deduction from business income of the employer is.

E. Navales Corporation granted ownership of several housing units to the following employees on its
foundation day:
Name Position Property value
M Finance manager 3,000,000
C Production supervisor 2,000,000

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 R Ticketing clerk 1,500,000
S Maintenance staff 1,000,000

1. Compute the total monetary value of all fringe benefits

2. Compute the total monetary value of housing benefits that are subject to the fringe benefits
tax

F. Clutter Good reimbursed the following expense liquidation of its managerial employee:
Purchase of office supplies 20,000
Personal meals and groceries 15,000
Gasoline for transportation (1/2 for business) 8,000
Office, electricity, water and telephone bills 12,000
1. Compute the monetary value of fringe benefits
2. What is the fringe benefit tax if the managerial employee is a resident citizen?

G. The manager of MYERS Company received the following:

Annual salary P6,000,000
Toyota car purchased by MYERS Company in the name of the manager 1,020,000
Rice allowance 147,200
Medical allowance 101,800
1. Taxable Value of benefit
2. Amount of deduction to be recognized by employer
3. Non-taxable monetary value

H. Swan Company provided the following fringe benefits to its employees during the 2013 taxable
year:
Fringe benefits provided to supervisor and managerial employees 956,250
Fringe benefits furnished to rank and file employees 430,750
Fringe benefits granted to NRA-NETB in the Philippines 750,000

Compute the following:

1. Value of fringe benefit
2. Fringe benefit tax
3. Journal entry to record the transaction

I. In 2022, the BIR found that XY Corporation’s payments of fringe benefits to its managerial employees
in 2021 were charged to miscellaneous expense amounting to P102,000. If the company’s 2021 net
income after tax was P1,750,000,
1. What is the deductible expense related to fringe benefits by the corporation?
2. How much is the tax recovered by the government for the said discovery?

J. Lee Company provided the following benefits to its Visayas and Mindanao area heads:

Area heads of Visayas – residential property, owned by the company and assigned to the
manager, acquired on cash basis for P8,850,000. The fair market value of the property is
P9,520,000.

Area heads of Mindanao – residential housing unit acquired on installment basis for the use of
the manager. The property was acquired for P6,800,000.
1. Total fringe benefit tax
2. Total monetary value

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material is used solely as an educational tool for distance and remote learning and for the personal use only of students enrolled in BA 127 FS 2022-2023.
K. Jessie, chief operating officer of LM Company attended a business convention in the United States
for five days. As a high-ranking officer, he was allowed to bring along his two children and wife,
Barbara, to the affair. The company paid the following expenses in connection with the foreign travel:
a) Business-class airline tickets for the children and Barbara costing P50,000 each and first class
tickets for Jessie costing P125,000.
b) Inland travel expenses at $450 per day for the children and Barbara, while $550 per day for officers
of LM Company.
c) In order to facilitate the processing of his children's license from a government office for travel
abroad, Jessie, with the approval of his employer, found it necessary to pay the amount of
P100,000 to the approving official.
d) Assume the exchange rate equals $1: P50.
Required:
1. Non-taxable monetary foreign travel benefits
2. Taxable monetary foreign travel benefits
3. Total Monetary value of foreign travel expenses

You may not under any circumstances, transmit, reproduce, distribute, display, or lend, in whole or part, any of the contents provided in this document. Access to this
material is used solely as an educational tool for distance and remote learning and for the personal use only of students enrolled in BA 127 FS 2022-2023.