INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC

Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
INSTITUTIONAL REVIEW
MAY 2019 BATCH

TAXATION
DRILL 1

1. Accounting periods is not applicable to this taxpayer.

a. Non -resident alien engaged in trade or business
b. Non-resident alien
c. Non-resident alien not engaged in trade or business
d. None of these

2. Which is a regulatory tax?

a. Sin Tax c. Business Tax
b. Income Tax d. Tax Surcharge

3. Income tax is not a/an

a. Excise Tax c. Internal Revenue Tax
b. Regulatory Tax d. Ad valorem Tax

4. PCSO or Lotto Winnings above P10,000 is

a. Exempt from final tax for any taxpayer
b. Subject to regular tax for aliens
c. Subject to regular tax if the recipient is a non-resident foreign corporation
d. Subject to 20% final tax for a non-resident alien not engaged in business

5. It is a national tax as to imposition but local tax as to collection.

a. Franchise Tax c. Professional Tax
b. Real Property Tax d. Amusement Tax

6. The accounting period allowable to general professional partnership shall be

a. Calendar only c. Calendar or Fiscal
b. Fiscal only d. Calendar and Fiscal

7. Mr. Piga is a self-published author. He prints his book and contracted Rex Bookstore, another book publisher and
distributor, to market his book. He gives Rex Bookstore a 30% discount of the total invoice price of his books.
During the month, Rex Bookstore purchased a total of P3,000,000. Which of the following is correct?
a. Mr. Piga is subject to regular tax on his gross income.
b. Rex Bookstore shall withhold a 10% final tax on Mr. Piga’s income
c. Mr. Piga shall withhold a final tax from the pre-agreed discounts of Rex Bookstore
d. None of these.

8. ABC Company, a domestic corporation owned 60% of the stocks of DEF Corporation, a corporation incorporated
according to the laws of Vietnam. DEF Corporation also owns 10% stake in ABC Company. During the year, ABC
declared P1,000,000 dividend while DEF also declared P500,000 dividends.
Which of the following statements is correct?
a. The dividends due ABC Company shall be subject to a final tax.
b. The dividends due DEF Corporation shall be subject to final tax.
c. The dividends due ABC Company shall be subject to a regular tax.
d. The dividends due DEF Corporation shall be subject to regular tax.
 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
9. Atty. Salas wrote a book entitled “The Sexy’s Diary” published under Barongot publishing. Barongot
Publishing pays an annual royalty of 10% of net sales. During the year, “The Sexy’s Diary” fetched a gross
sales of P 10,000,000 before P800,000 sales discounts and P2,000,000 bookstore commissions. There
were unsold copies with total retail prices of P2,000,000.

Compute Atty. Salas’ final tax.

a. P184,000 c. P 92,000
b. P100,000 d. P 72,000

10. Banco Delicado had the following depositor’s account with their corresponding interest at the end of the
month.
Interest on deposit account Time deposit duration
Mr. Calbo Sayaman,CPA P 24,000 1 year
Calbo,Panot & Associates, CPA’s P 20,000 2 years
Berde Corporation P 30,000 5 years
TOTAL P 74,000
Compute the total amount of final tax to be withheld by Banco Delicado.
a. P 8,400 c. P 4,800
b. P 14,800 d. P 10,800

11. Which is not subject to final tax?

a. Compensation income of a special alien
b. Domestic Dividends to a non-resident corporate shareholder
c. Deposit interest to a non-resident alien not engaged in business
d. None of these.

12. Macquarie,Inc., had the following transactions in the shares of stocks of San Miguel Corporation (SMC),
a domestic listed company, through its broker Coyiuto Securities:
a) January 8, 2018: Purchased 100,000 shares of SMC at its par value of 45/share
b) February 14, 2018: Received 50,000 shares as stock dividend of SMC when the shares were trading
P35/share
c) June 5, 2018: Disposed 50,000 shares for 52.8/share to Mr. Ramon Ang, SMC’s chief executive
officer. Coyiuto Securities charged a commission of 1/10 of 1% of the selling price.
Compute the final gains tax.
a. P 0 c. P 107,892
b. P 108,736 d. P 169,338

13. Mr. Jemuel Ulnagan,CPA started a professional practice earlier in 2018 as a sole proprietorship. With
increasing clients, he was convinced of the need to have a partner. He met a charming and passionate
accountant, Ms. Sharmaine Miguel.So he decided to admit Sharmaine into his professional practice on
February 14, 2018. The lover-partners agreed to share profit equally. The firm registered a profit of P
1,000,000 which is inclusive of P200,000 earned before February 14.
Compute Mr. Ulnagan’s reportable gross income in 2018.
a. P200,000 c. P600,000
 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
b. P500,000 d. P1,000,000

14. Hyundai Tuguegarao,Inc., a dealer of car, sold a Hyundai Accent for P4,500,000 on January 17,2018 to
JhunJhun. The car had a cost of P3,000,000. The buyer agreed to pay 20% down and the balance in 36 equal
monthly installments starting February 2018. Compute the reportable gain in 2018.
a. P 1,500,000 c. P 458,333
b. P 666,667 d. P 1,000,000

15. Dae Corporation disposed a building for P5,000,000 on November 30, 2018. The property which has a fair
value of P6,000,000 had an acquisition cost of P2,000,000 ten years ago. The property was previously
mortgage for P2,500,000 which was assumed by the buyer. The buyer agreed to pay P500,000 upfront
cash with the balance due in 20 monthly equal installments.
Compute the initial payment.
a. P500,000 c. P1,000,000
b. P600,000 d. P1,100,000

16. Compute the reportable gain in 2018 for the preceding number.
a. P2,500,000 c. P1,000,000
b. P1,100,000 d. P550,000

17. Amboy, a realty dealer, exchanged a pension house in exchange for the residential house of Pedro, a
medical doctor. Pedro’s residential house is located in a highly urbanized locality. The pension house and the
residential house have zonal values of P3.5M and P7M and adjusted cost basis of P2M and P3M,
respectively. Amboy made additional cash payments in favor of Pedro.

Which is incorrect?
a. Both parties to the exchange are subject to income tax.
b. Amboy shall report a P2M gain subject to regular income tax.
c. Pedro shall pay 6% capital gains tax on the P7M fair value of his property.
d. None of these.

18. After four years of selling, Don Romantico was able to dispose his agricultural land for P22.5M. The sale
made at 10% discount of zonal value. The property was acquired eight years ago at P23M.Which statement
is correct?
a. Half of the loss on the sale of land is a capital loss that is deductible to the extent of the capital gain.
b. The loss on the sale of the land is neither a deduction to capital gains nor deduction to a gross income.
c. The sale of the land is subject to a capital gains tax at its P22.5M selling price.
d. The sale of the land is not subject to a capital gains tax since the transaction resulted into a loss.

19. Which is not a Constitutional Limitation?

a. No tax law shall be passed without the concurrence of the majority of all members of the congress.
b. Non-appropriation for religious purposes.
c. No law impairing the obligations or contracts shall be passed.
d. Non-impairment of religious freedom.

20. Statement I: Only depreciable properties of business can be classified as ordinary asset.
Statement II: Land used in business is a capital asset since it is not subject to depreciation.
 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY

Which is not true?

a. Statement I is false c. Both statements are false
b. Statement II is false d Both statements are correct.

21. Which is a large taxpayer?

a. A taxpayer with quarterly VAT of P900,000.
b. A taxpayer with annual income tax of P900,000.
c. A taxpayer with annual excise tax due of P900,000.
d. A taxpayer with annual withholding tax remittances of P900,000.

22. A supervisory employee with four dependents had the following income during 2018.

Compensation Income, net of P230,000 withholding tax P 720,000

Value of house and lot inherited from deceased father 2,000,000
Value of motorcycle given by the company as fringe benefits 95, 200

Gross income from exercise of profession 400,000

TOTAL INCOME P 3, 215, 200
Less: Expenses
- Expenses of professional practice 200,000
- Personal and family expenses 150,000
Net income P 2, 865, 200

Compute the income tax payable or refundable.

a. P 0 c. P 5,000 payable
b. P5,000 refundable d. P 55,000 payable

23. Compute the total final tax withheld.

a. P16,800 c. P30,464
b. P44,800 d. P51, 262

24. Compute the total deductible expense of the employer.

a. P 1,090,000 c. P860,000
b. 1,096,462 d. P146,462

25. Compute the total correct final taxes to be withheld if the employee is qualified as a special alien.
a. P 0 c. P16,800
b. P 14,280 d. P159,300

26. Angacola Femsa Corporation is providing a free housing to its supervisors to ensure their continued
presence in the factory so that the company can maintain effective quality control on rush customer
orders. During the quarter, the total rental value of the housing accommodation amounted to P295,800.

Compute the total fringe benefits tax.

 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
a. P0 c. P159,277
b. P79,638 d. 139,200

27. Compute the total deduction of Angacola Femsa against gross income.
a. P0 c. P455,077
b. P227,538 d. 435,000

28. In 2018, Cornica, a domestic Corporation, received P500,000 dividend from Cornicorp Systems, a foreign
corporation operating in the Philipines. A research of the net income of Cornicorp in the preceding three
years revealed the following:
2018 Philippines Abroad World
Gross income P10,100,000 P12,000,000 P22,100,000
Expenses P 8,000,000 9,000,000 17,000,000
Net income P2,100,000 P3,000,000 P5,100,000
Taxes paid abroad P 750,000

2017 Philippines Abroad World

Gross income P12,000,000 P11,900,000 P23,900,000
Expenses P10,000,000 P 9,000,000 P19,000,000
Net income P 2,000,000 P 2,900,000 P 4,900,000
Taxes paid abroad P 870,000

2016 Philippines Abroad World

Gross income P15,000,000 P9,000,000 P24,000,000
Expenses P11,500,000 P5,500,000 P17,000,000
Net income P 3,500,000 P3,500,000 P 7,000,000
Taxes paid abroad P1,225,000

Compute the income of Cornica subject to Philippine tax and determine the tax scheme that would
apply.
a. P 0 c. P265,000 final tax
b. P265,000 regular tax d. P500,000 regular tax

29. Assuming Cornica is a resident foreign corporation, compute the income subject to Philippine tax and the
tax rate that would apply.
a. P 0 c. P265,000 final tax
b. P265,000 regular tax d. P500,000 regular tax

30. Assuming Cornicorp is a domestic corporation, compute the income of Cornica subject to Philippine income
tax and determine the tax scheme that would apply.
a. P265,000 regular tax c. P500,000 final tax
b. P265,000 final tax d. None

31. Assuming Cornnicorp is a domestic corporation, compute the amount of tax due after tax credit in 2018.
a. P875,000 c. P750,000
b. P780,000 d. P1,050,000
 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
32. John disposed a real property capital asset on July 15, 2018. The property had a zonal value of
P12,000,000 and was acquired for P8,000,000. John reported a P5,000,000 gain on the sale which he reported
in his 2018 income tax return. On July 1, 2019, the BIR handed him an assessment for failure to pay capital
gains tax on the sale. The assessment was based on the selling price of the property.

Which of the following statements is correct?

a. John should not be subject to capital gains tax since he already paid the regular tax on the
transaction in good faith.
b. John should be assessed capital gains tax but the same should be based on the fair value of the
property.
c. John should settle the assessment for capital gains tax but shall file a claim for refund for
overpayments in regular taxes.
d. None of these.

33. In the immediately preceding problem, what is the deadline of the capital gains tax due on the sale?
a. July 31, 2018 c. August 14,2018
b. August 15, 2018 d. August 5, 2018

34. In the immediately preceding problem, what is the deadline of the documentary stamp tax due on the sale?
a. July 31, 2018 c. August 14,2018
b. August 15, 2018 d. August 5, 2018

35. Assuming the property was sold to the government n pursuant to an expropriation, is the assessment valid?
a. Yes, the involuntariness of the sale does not affect the taxability of the property being a real
property capital asset.
b. No, the assessment should have been based on the fair value of the property.
c. Yes, the transaction involves a real property capital asset which is subject to capital gains tax not to
regular tax.
d. No, this is an instance of direct double taxation. The assessment would find no basis in law.

36. Which statement is false?

a. The government can impose taxes on government agencies, bureaus, and instrumentalities.
b. The government can acquire private properties at any cost if needed for public purposes.
c. The government can set aside contracts entered into with private entities if contrary to the public
interest.
d. None of these.

37. Which is a constitutional limitation?

a. Impairment of obligation and contract.
b. Exemption of schools from real property tax.
c. Non-delegation of tax collection.
d. Appropriation for religious purposes.

38. A taxpayer received the following VAT billing of his rented residence:
Rent P10,000
Output VAT 1,200
TOTAL AMOUNT DUE P11,200
 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
Assuming the taxpayer is a non-VAT registered person, how much can he claim as a deduction
against his gross income?
a. P11,200 c. P10,000
b. P 1,200 d. P0

39. Which of the following are not related for purposes of income tax to a taxpayer?
a. Great grandfather of the taxpayer
b. The taxpayer’s niece
c. The taxpayer’s half brother
d. The taxpayer’s mother

40. Which is the applicable tax rate on deposit interest to a non-resident citizen?
a. 20% c. 10%
b. 25% d. 30%

41. Which is the applicable tax rate on deposit interest through the expanded foreign currency depositary unit of
a resident citizen?
a. 7.5% c. 15%
b. 20% d. 10%

42. Which is subject to creditable withholding tax?

a. Salaries of a special alien
b. Salaries of a non-resident alien not engaged in trade or business
c. Share in the net income of a general professional partnership
d. Share in the net income of a business partnership

43. The quarterly income tax return of individual income taxpayer is due
a. 30 days after the end of the first three quarters
b. 45 days after the end of the first three quarters
c. 60 days after the end of the first three quarters
d. April 15,August 15,November 15 for the first to third quarter respectively.

44. The quarterly corporate income tax is due

a.30 days after the end of the first three quarters
b.45 days after the end of the first three quarters
c. 60 days after the end of the first three quarters
d. April 15,August 15,November 15 for the first to third quarter respectively.

45. The net income per book of the corporate taxpayer is calculated as P400,000 after considering the
following:
Interest income-bank deposits P 50,000
Contributions to accredited charitable institutions P 70,000
Contributions to non-accredited charitable institutions P100,000
Provisions for bad debts expense P 80,000
Salaries expense P200,000

How much is the deductible contributions expense?

 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
a. P170,000 c. P105,000
b. P130,000 d. P100,000

46. A corporate taxpayer reported an interest expense of P400,000 on its bank loan, net of P45,000 net
interest income earned from temporary deposits of the same amount in its bank account prior to its
disbursement. What is the correct amount of deductible interest expense?
a. P381, 438 c. P400,000
b. P445,000 d. P426,438

47. Which is qualified as a basis of exemption of separation benefits?

a. At least 10 years cumulative employment with employer
b. First time availment of exemption
c. Mass employment lay-off
d. All of these.

48. On January 2, 2017, ISAP Corporation purchased P1,000,000 bonds from MCNP Corporation. The 10-
year term bonds were issued at face value bearing interest of 15% payable every December 31. On December
1, 2018, ISAP Corporation disposed the bonds at P1,213,750. Compute the amount of reportable gross
income for 2018.
a. P137,500 c. P175,625
b. P76,250 d. P213,750

49. Assuming that the bonds had a maturity of four years in the immediately preceding problem, what would be
the total reportable gross income ?
a. P137,500 c. P175,625
b. P76,250 d. P213,750

50. Which statement is a precise preference to time?

Statement 1: We are currently reviewing your application.
Statement 2: We are at this moment reviewing your application.

a. Statement 1 c. Either of the two

b. Statement 2 d. Neither of the two

51. Which of the following statements is more direct and idiomatic?

Statement 1: Her superior training was the great factor in her winning the match.
Statement 2: She won the match by being better trained.

a. Statement 1 c. Either of the two

b. Statement 2 d. Neither of the two

52. Which of the following is a redundant expression?

a. He is a man who is very ambitious.
b. He is a very ambitious.
c. Boracay attracts visitors because of its white sand.
d. None of the choices.
 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY

53. Which of the following is not correct?

a. Irregular c. Irregardless
b. Irresponsible d. Irrespective

54. Which of the following statements is not correct?

Statement 1: They had fewer auditors than in the previous year.
Statement 2: They had less auditors than in the previous year.

a. Statement 1 c. Either of the two

b. Statement 2 d. Neither of the two

55. When shall the Application for Registration for Individuals Earning Purely Compensation income, and Non-
Resident Citizens or Resident Alien Employee be filed?
a. Within ten (10) days from the date of employment, or before the payment of any tax due or before filing
of a return, or declaration is required with the RDO having jurisdiction over the taxpayer’s residence or
place of employment.
b. Within fifteen (15) days from the date of employment, or before the payment of any tax due or
before filing of a return, or declaration is required with the RDO having jurisdiction over the taxpayer’s
residence or place of employment.
c. Within twenty (20) days from the date of employment, or before the payment of any tax due or
before filing of a return, or declaration is required with the RDO having jurisdiction over the taxpayer’s
residence or place of employment.
d. On or before commencement of business, or before the payment of any tax due or before filing of a
return, or declaration is required with the RDO having jurisdiction over the principal office of business or
branch/ regional office.

56. In which situation will the financial statements require that they be certified by a CPA?
a. When the gross receipts/sales in any quarter does not exceed P 50,000.00
b. When the gross receipts/sales in any quarter exceeds P 50,000.00 but does not exceed P 150,00.00
c. When the gross receipts/sales in any quarter exceeds P 150,000.00
d. When the gross receipts/sales in all quarters exceeds P 150,000.00
57. Jhunjhun sold his old residence on fear of a ghost that looks like him. The selling price was P2,000,000. He
immediately acquired a new residence utilizing the whole proceeds of his old residence which were exempt
from capital gains tax. While dressing for a date one day, he saw the same ghost on the mirror. This prompt him
to sell his new residence at a P600,000 discount from its P2,400,000 fair value .Jhunjhun immediately
reacquired another residence for P2,000,000 beside the residence of his boy friend at Caggay, Tuguegarao
City.

Compute the capital gains tax on the sale of the second residence.
a. P 0 c. P120,000
b. P108,000 d. P144,000

58. Ms. Sumbungera, who was the administrative assistant of the municipal administrator of the Municipality of
Mangilawlawan was very fond of “chismis”. One day, while walking in the Chismisan Center of a certain street
named Di Mabirbirukan, he heard that Mr. Kimmugtar who is the owner of a mini grocery in Brgy.
Pakapukpukawan was fraudulently underdeclaring his sales and overstating his expenses. As such, he is
paying only P 3,051.00 tax from his thousands of pesos sales since his store is the only business in that are.
 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
With the mind that he will be receiving a reward if this will be known by the BIR, she wrote a letter to the
RDO alleging this tax evasion of Mr. Kimmugtar. As a result, it brought out an assessment of
deficiency tax amounting to P 12,000,000.00 since the establishment of the business 10 years ago
up to now. With this, she went home hoping that he will receive P 1,200,000.00 which was the 10% of
the recovered amount of taxes. While Mr. Kimmugtar was very anxious on how he will raise that amount of
money needed to pay the assessment of the BIR which became final and demandable.

Based on the foregoing question, how much will be the reward of Ms. Sumbungera?
a. P 1,000,000 c. P1,080,000
b. P 900,000 d. P 0

59. The Commissioner of Internal Revenue is not authorized to

a. Interpret the provisions of the NIRC and TRAIN Law
b. Issue Revenue Regulations
c. Change tax period
d. Prescribe presumptive gross receipts

60. What is the threshold amount for the exemption of 13 th month pay and other benefits as provided by in the
TRAIN Law?
a. P30,000 c. P82,000
b. P90,000 d. P92,000

-------------------------------------------------------------------
--- end of examination---

RANGE BASIC TAX PLUS OF EXCESS OVER

NOT OVER P250,000 - 0%
OVER P250,000 BUT NOT OVER 20% P 250,000
P400,000
OVER P 400,000 BUT NOT OVER P30,000 25% 400,000
P800,000
OVER P800,000 BUT NOT OVER P P130,000 30% 800,000
2,000,000
OVER P2,000,000 BUT NOT OVER P490,000 32% 2,000,000
5,000,000
OVER P5,000,000 - P1,450,000 35% 5,000,000
 INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC
Alimannao Hills, Penablanca, Cagayan 3502

C OLLEGE OF B USINESS A DMINISTRATION AND A CCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
INSTITUTIONAL REVIEW
MAY 2019 BATCH

TAXATION
DRILL 2