Taxation Situational Problems

Compiled by: Mark Lester Marquez,CPA

Note: Hindi ito yun exact na lumabas sa CPA boards pero ganito yung mga
batuhan ng tanong sa actual exams kaya dat masanay ka sa ganitong type
of questions para di shookt sa actual boards. Most of these questions
ay galing kay kuya Vhin and other resources. Cinompile ko lang yun mga
comprehensive situational tax probs.
I know kung gaano kahirap mag aral at abutin ang pangarap natin
pero walang imposible basta’t maniwala lang tayo. Aral ka na bes :)

Situational 1

Sinagtala Foods Corporation is engaged in the food business. It

operates various restaurants in Metro Manila. It was registered with
the BIR and SEC five years ago. The following information relates to
its operations for the year ended December 31, 2019:

Sales/Revenues 10,000,000
Sales discounts 300,000
Interest income on foreign currency bank 15,300
deposit, net of tax
Other income (not subject to final tax) 750,000
Cost of sales – food 1,200,000
Cost of sales – packaging 500,000
Salaries and bonuses – servers/waiters 1,500,000
Salaries and bonuses – store supervisors 700,000
and managers
Rental expense – stores 850,000
Utilities expense – stores 325,000
Repairs and maintenance – stores and 300,000
store facilities
Depreciation – stores and store 600,000
facilities
Stores and store facilities impairment 525,000
loss
Pension expense – servers/waiters 380,000
Pension expense – store supervisors and 250,000
managers
Salaries and bonuses – sales and 560,000
administration
Rental expense – administration 450,000
Utilities expense – administration 225,000
Repairs and maintenance – administration 150,000
Depreciation expense – administration 280,000
Building impairment loss – administration 475,000
Interest expense 375,000
Taxes and licenses 480,000
Provision for various losses including 550,000
tax exposures
Pension expense – administration 180,000
Other administration expenses 425,000
The following are the additional information:
a. Sales discounts include senior citizen and PWD discount of
₱50,000.
b. Pension expense pertains to accrual of expenses under PAS
19. There were no contributions to the pension fund.
c. Taxes and licenses include documentary stamp tax of
₱100,000, donor’s tax of ₱50,000 and local business tax of
₱280,000.
d. Sinagtala opted to use the itemized deduction.

1. Compute page 2, Item 31 of BIR Form No. 1702-RT?

a.₱ 9,750,000
b.₱ 3,775,000
c.₱ 4,525,000
d.₱ 8,050,000

2. Compute page 2, Item 42 of BIR Form No. 1702-RT?

a.₱ 195,000
b.₱ 90,500
c.₱ 161,000
d.₱ 75,500

3. Compute page 2, Item 43 of BIR Form No. 1702-RT?

a.₱ 475,782
b.₱ 490,782
c.₱ 747,282
d.₱ 618,282

4. Assume that Sinagtala opted to use the optional standard deduction

(OSD), compute page 2, Item 43 of BIR Form No. 1702-RT?
a.₱ 1,755,000
b.₱ 679,500
c.₱ 814,500
d.₱ 1,449,000

Situational 1-B

Use the following information for the next five questions:

CREATE LAW - For the calendar year 2021, the net income per
books after tax of RMC Corporation is P850,000, after
considering among others:

Interest income from bank deposit 5,500

Dividends from domestic corporation 5,000
Gain from sale of unlisted shares of a domestic 7,000
corporation
Loss sustained from a family member 2,500
Bad debts written off 6,500
Provision for bad debts 8,000
Write-off of inventories lost due to spoilage or 12,000
expiry
Depreciation on appraised value of property 15,000
Surcharge and compromise paid in relation to the 80,000
late filing of ITR
Contribution to government exclusively for 50,000
public purpose
Contribution to government's priority program in 10,500
education
 Quarterly income tax payments 65,000

The net income per book should be reconciled with the provisions of the
Tax Code, meaning, items which are not taxable must be excluded, and
items which are not deductible are to be added back.

REQUIRED: Assuming the total assets of the entity amounted to

P110,000,000, excluding land, solve the following:

5. How much is the net income before charitable and other

contributions?
a.P1,069,000
b.P1,008,500
c.P1,005,050
d.P1,004,000

6. How much is the taxable income?

a.P1,005,050
b.P1,008,500
c.P943,500
d.P940,050

7. How much is the corporate income tax still due?

a.P251,263
b.P186,263
c.P252,125
d.P187,125

8. How much is the total final tax on income not subject to regular
income tax?
a.P1,100
b.P2,150
c.P3,150
d.P0

9. How much is the total tax expense?

a.P254,275
b.P188,413
c.P189,275
d.P187,363

Situational 1-C

Use the following information for the next five questions:

Rommel, together with Jay, Lester, Jason, and Rain, started a

corporation which they named as Big Bros, a firm which is engaged in
manufacturing of cements. They were able to register it with SEC and
BIR last January 5, 2018, before the surge of the COVID-19 pandemic.
The entity started its operation immediately after the registration.

During the taxable year of 2021, you are engaged by Big Bros to prepare
the income tax return in compliance with the Tax Code. Big Bros has the
following data which were taken from its annual income statement for
the year.

Gross sales of goods P150,000,000

Sales returns and allowances (800,000)
 Net sales of goods 147,200,000

Cost of sales:
Beginning finished goods P45,000,000
inventory
Cost of goods manufactured 98,650,000
Cost of goods available for 143,650,000
sale
Ending finished goods inventory (78,950,000)(64,700,000)
Gross income 82,500,000
Operating expenses:
Salaries expense P5,500,000
Wages expense 7,400,000
Depreciation expense 10,500,000
Rental expenses 15,000,000
Entertainment expenses 750,000
Research and development 3,500,000
expenses
Bad debt expense 1,500,000
Impairment loss on goodwill 500,000
Estimated warranty expense 2,500,000 (47,150,000)
Operating income 35,350,000
Non-operating income/other
income:
Gain on sale of shares of stocks 1,280,000
directly to buyer
Gain on sale of debt securities 1,550,000
classified as FVTPL
Gain on sale of real property 4,050,000
Dividend income from a domestic 1,600,000
corporation
Dividend income from resident 1,250,000
foreign corporation
Interest income from local 1,920,000
currency bank deposits
Interest income from trades 750,000 12,400,000
receivable
Non-operating expenses:
Interest expense 3,500,000
Charitable contribution 5,000,000 (8,500,000)
Net income before tax 39,250,000
Income tax expense (9,812,500)
Net income P29,437,500

Additional notes:
● The entity elected to use an accrual method of accounting since
the start of its operation.
● The entity uses allowance for doubtful accounts as a method in
estimating bad debt expense.
● The record shows that the real property with a book value of
P6,000,000 was sold for P10,050,000. However, upon careful
examination, the fair market value determined by the city assessor
and the zonal value of the real property amounted to P12,000,000
and 9,000,000, respectively. The said real property is not used in
business by the entity.

● It was also determined that the requisites for exemption for

foreign-sourced dividends under Section 27D have been met.
 ● Upon inspection of the books, one record shows that entertainment
and representation expenses are duly supported by receipts and
are business connected.

REQUIRED: Compute for the following:

10. Taxable income for the year

a.P34,900,000
b.P33,650,000
c.P37,095,600
d.P35,545,600

11. Corporate income tax due

a. P9,273,900
b. P9,812,500
c. P8,412,500
d. P8,886,400

12. Capital gains tax

a.P435,000
b.P795,000
c. P912,000
d.P1,144,500

13. Final withholding tax on passive income

a.P540,000
b.P384,000
c.P784,000
d. P854,000

14. Total income tax expense for the year

a. P9,708,500
b. P10,414,900
c. P10,569,900
d. P11,108,500

Situational 1-D

Use the following information for the next four questions:

XYZ Pharmaceuticals is engaged in the business of providing services

and selling of drugs and medicines. The following data were made
available for the first quarter of 2019:

Revenues Php 20,000,000

Cost of goods sold 5,000,000
Cost of services 12,000,000
Operating expenses 3,000,000
Receivables: December 31, 2018 448,000
Receivables: March 31, 2019 336,000

In addition, the following information was provided:

a. All sales for the first quarter were cash and credit card sales.
b. Sale of goods made to senior citizens are cash sales.
c. Sales are net of senior citizens discount amounting to Php
400,000.
 d. Receivables at the beginning and ending of first quarter
are outstanding receivables from credit card companies.
e. The amounts of receivables are VAT inclusive.
f. Sales are inclusive of sales of medicines prescribed for
diabetes, high cholesterol, and hypertension to non-senior
citizens amounting to Php 600,000.
g. Included in the operating expenses are entertainment,
amusement, and recreational expenses amounting to Php
300,000.
h. Input tax credit from purchase of goods and services for the
first quarter amounts to Php 600,000.
i. Other sales made to non-senior citizens were composed of
services.

REQUIRED: Compute for the following items:

15. How much is the output tax due for the first quarter of 2019?
a.P2,088,000
b.P2,148,000
c.P2,136,000
d.P2,160,000

16. How much is the deductible creditable input tax for the first
quarter of 2019?
a.P600,000
b.P522,000
c.P523,902
d.P533,333

17.How much is the income tax due for the first quarter of 2019,
assuming itemized deduction was used?
a.P7,171
b.P39,571
c.P630,000
d.P1,560,000

18. How much is the income tax due for the first quarter of 2019,
assuming OSD was used?
a.P39,571
b.P630,000
c.P1,560,000
d.P3,690,000

Situational 2

Data relative to ordinary gains/losses and capital gains are shown below
for the taxable year 2019:

Gross income 730,000

Operating expenses 300,000
Gain on sale of business equipment, held for 15 months 100,000

Gain on sale of lot not used in business held for 40,000

3 years (Gross selling price: ₱340,000; Cost:
₱300,000; FMV: ₱400,000)
Gain on sale of furniture not used in business, held for 50,000
6 months
 Loss on sale of vehicle not used in business, held for 60,000
2 years
Loss on sale of shares of stock listed/trade at stock 5,000
exchange (Gross selling price: ₱70,000; cost: 75,000)
Net capital gain from sale of shares of 100,000
stock not listed/traded at stock exchange (Capital
gains: ₱300,000; capital losses: ₱200,000)

5. Compute Page 2, Item 25 schedule 3.A of BIR Form No. 1701:

a.₱125,000
b.₱122,000
c.₱67,500
d.₱-0-

6. Assuming the taxpayer opted to apply the 8% fixed income tax rate
in lieu of the graduated income tax rates. Compute page 2, Item
32 schedule 3.B of BIR Form No. 1701:
a.₱68,000
b.₱66,400
c.₱60,000
d.₱-0-

7. Assuming the facts in number 5. Compute Item 36 of BIR Form 1706

that may be deducted in the next taxable year 2020 by the
individual taxpayer is:
a.₱60,000
b.₱10,000
c.₱-0-
d.None of the foregoing.

8. Assuming the facts in numbers 5 and 6. Compute Item 36 of BIR

Form 1706 that may be deducted in the next taxable year 2020 by
the corporate taxpayer is:
a.₱60,000
b.₱10,000
c.₱-0-
d.None of the foregoing.

9. Assuming the facts in number 5. The total final capital gains

taxes to be reported in separate capital gains tax returns
amount to:
a.₱39,000
b.₱30,400
c.₱29,000
d.₱-0-

Situational 3

Magaling Company is engaged in merchandising business with the following

information for the year ended December 31, 2019:
Gross sales 6,000,00
Sales returns and allowances 300,000
Sales discounts 350,000
Purchases 2,000,00
Purchase returns and allowances 100,000
Purchase discounts 150,000
Freight-in 200,000
Inventory, January 1 300,000
 Inventory, December 31 250,000
Operating expenses, supported 1,000,00
by invoices and receipts
Operating expenses, not supported by 500,000
invoices and receipts
the sales discounts include ₱150,000 discounts granted to senior
citizens and PWDs. The following are additional independent situations:

Situation A
Magaling filed its first quarter income tax return on May 30, 2019,
and it used the OSD. However, it used the itemized deduction in its
second and third quarter income tax returns.

Situation B
Magaling filed its first quarter income tax return on May 30, 2019 and
it used the itemized deduction. However, it amended its first quarter
income tax return on June 30, 2019 and adopted the OSD. OSD was used
in its second and third quarter income tax returns.

10. Assume that Magaling is a corporation, using Situation A,

compute Page 2, Item 39 of BIR Form 1702- RT for the year 2019?
a.₱1,400,000
b.₱3,500,000
c.₱2,200,000
d.₱2,400,000

11. Assume that Magaling is a corporation, using Situation B,

compute Page 2, Item 39 of BIR Form 1702- RT for the year 2019?
a.₱1,400,000
b.₱3,500,000
c.₱2,200,000
d.₱-0-

12. Assume that Magaling is a corporation, using Situation A,

compute Page 2, Item 40 of BIR Form 1702- RT for the year 2019?
a.₱3,600,000
b.₱3,300,000
c.₱5,250,000
d.₱2,100,000

13. Assume that Magaling is a corporation, using Situation B,

compute Page 2, Item 40 of BIR Form 1702- RT for the year 2019?
a.₱3,600,000
b.₱3,300,000
c.₱2,350,000
d.₱2,100,000

14. Assume that Magaling is a sole proprietorship, using

Situation A, compute Page 2, Part IV.A Item 39 of BIR Form
1701-A for the year 2019? (Observe Tax Minimization)
a.₱2,200,000
b.₱2,400,000
c.₱2,340,000
d.₱3,000,000
 15. Assume that Magaling is a sole proprietorship, using Situation
B, compute Page 2, Part IV.A Item 39 of BIR Form 1701-A for the
year 2019? (Observe Tax Minimization)
a.₱2,200,000
b.₱2,400,000
c.₱2,340,000
d.₱-0-

16. Assume that Magaling is a sole proprietorship, using

Situation A, compute Page 2, Part IV.A Item 45 of BIR Form
1701-A for the year 2019? (Observe Tax Minimization)
a.₱3,100,000
b.₱3,300,000
c.₱2,100,000
d.₱2,350,000

17. Assume that Magaling is a sole proprietorship, using

Situation B, compute Page 2, Part IV.A Item 45 of BIR Form
1701-A for the year 2019? (Observe Tax Minimization)
a.₱3,100,000
b.₱3,300,000
c.₱2,100,000
d.₱2,350,000

Situational 4

Kit Corporation, an entity engaged in real estate business, purchased a

parcel of land in Calamba for ₱15,000,000 on March 1, 2018 when its
fair market value was ₱14,800,000. The said land will be further
developed where housing units will be constructed. Kit incurred land
development costs for ₱5,000,000, construction costs for roads and
other structures on the land for ₱4,000,000 and construction costs
related to the housing units for
₱10,000,000 during 2018.

During 2019, Kit started selling houses and lots in Calamba. There
were 30 units of houses and lots which were developed and constructed.
As of December 31, 2019, Kit sold 15 units of houses and lots for
₱3,500,000 each which were paid in cash. These houses and lots have
the same area and specifications. The cost of these houses and lots
were assumed to be the same.

On December 1, 2019, Kit sold a parcel of land in Alabang for

₱12,500,000 with fair market value of
₱12,800,000. Said land was purchased three years ago for ₱8,200,000
when its fair market value was ₱8,500,000. It planned to construct a
condominium building which should have been held for sale. However,
because of certain problems, the project construction did not push
through.

18. Determine the gain or loss from the sale of real properties for
the year ended December 31, 2019.
a. ₱52,500,000 ordinary gain
b. ₱52,500,000 capital gain
c. ₱37,500,000 ordinary gain
d. ₱37,500,000 capital gain
 19. Determine whether the gain or loss is a capital gain/loss or
ordinary gain/loss.
a. ₱4,300,000 ordinary gain
b. ₱(4,300,000)ordinary loss
c. ₱4,300,000 capital gain
d. ₱(4,300,000)capital loss

20. Determine the capital gains tax (CGT), if any, on the sale of
real properties.
a.₱258,000
b.₱270,000
c.₱210,000
d.₱-0-

Situational 5

Eugene and Mark Partnership is a general professional partnership, with

Mr. Eugene and Mr. Mark as partners. They share equally in the
partnership net income and loss. The partnership had gross revenues of
₱6,000,000, cost of services of ₱1,200,000 and business expenses of
P800,000 for the year ended December 31, 2019. Mr. Eugene, who is
single, had personal gross revenues of ₱800,000, cost of services of
₱200,000 and business expenses of P100,000 during the same taxable
year. Mr. Mark, who is married, with two qualified dependents, had
personal gross revenues of ₱900,000, cost of services of ₱120,000 and
business expenses of ₱80,000. Mr. Eugene and Mr. Mark withdrew only 60%
of their respective share in the partnership income.

21. Compute Page 2, Part IV Item 51 of BIR Form 1702-RT of the

Partnership for the year ended December 31, 2019?
a.₱-0-
b.₱1,200,000
c.₱1,440,000
d.₱1,500,000

22. Compute Page 2, Schedule 3.A Item 21 of BIR Form 1701 to be

reported by both partners in their respective ITRs?
a.₱4,000,000
b.₱3,000,000
c.₱2,000,000
d.₱1,000,000

23. Compute Page 2, Schedule 3.A Item 25 of BIR Form 1701 (of Mr.
Eugene) for the year ended December 31, 2019?
a.₱2,000,000
b.₱2,090,000
c.₱2,150,000
d.₱2,200,000

24. Compute Page 2, Schedule 3.A Item 25 of BIR Form 1701 (of Mr.
Mark) for the year ended December 31, 2019?
a.₱600,000
b.₱618,000
c.₱714,000
d.₱755,000
 25. Assuming the Partnership and Mr. Eugene adopted the optional
standard deduction (OSD), Compute Page 2, Schedule 3.A Item 25 of
BIR Form 1701 for Mr. Eugene?
a.₱466,000
b.₱486,000
c.₱516,000
d.₱526,000

26. Assuming the Partnership adopted the optional standard

deduction (OSD) while Mr. Mark adopted the itemized deduction,
Compute Page 2, Schedule 3.A Item 25 of BIR Form 1701 for Mr.
Mark?
a.₱486,600
b.₱516,600
c.₱524,800
d.₱534,800

27. Assuming the Partnership is a business partnership, Compute

Page 2, Part IV Item 51 of BIR Form 1702- RT of the Partnership
for the year ended December 31, 2019?
a.₱1,440,000
b.₱1,200,000
c.₱1,320,000
d.₱2,800,000

28. Assuming the Partnership is a business partnership, Compute

Page 2, Schedule 3.A Item 25 of BIR Form 1701 (of Mr. Eugene) for
the year ended December 31, 2019?
a.₱30,000
b.₱45,000
c.₱50,000
d.₱55,000
29. Assuming the Partnership is a business partnership, Compute
Page 2, Schedule 3.A Item 25 of BIR Form 1701 (of Mr. Mark) for
the year ended December 31, 2019?
a.₱105,000
b.₱75,000
c.₱55,000
d.₱50,000

30. An exempt general professional partnership shall adopt as its

taxable year the:
a. Calendar year
b. Fiscal year
c. Either (a) or (b)
d. Neither (a) nor (b)

Situational 6

Handy Manufacturing Company is engaged in the manufacture of toys for

export. It was incorporated and registered with the BIR in December
2018. It registered with the Board of Investments (BOI) and enjoyed an
Income Tax Holiday (ITH) incentive. Its ITH incentive commenced on May
1, 2019, which is the start of its commercial operations.
The following information relates to its operations for the year ended
December 31, 2019:
 January 1to May 1 to
April 30 Dec 31
Sales ₱ 100,000 8,000,000
Interest income 20,000 100,000
Scrap sales 300,000
Gain on sale of fixed assets 1,250,000
Foreign exchange gain 60,000 420,000

Cost of sales 20,000 3,200,000

Interest expense 400,000 600,000
Salaries and bonuses 300,000 2,500,000
Depreciation 400,000 1,600,000
Pension expense 300,000 600,000
Other business expenses 30,000 65,000
Foreign exchange loss 50,000 330,000
The following are the additional
● Interest income pertains to interest subjected to 20% FWT. The
amount recorded was gross of tax.
● Scrap sales pertain to sale of scraps which have undergone
production of P200,000 while the balance pertains to scrap raw
materials sold.
● Gain on sale of fixed assets pertains to gain from sale of
equipment.
● Foreign exchange gain pertains to realized and unrealized gains.
Out of the total amount, 30% of the gain from May to December 31,
2019 was not realized yet. The balance was already realized
during the year. These pertain to trade transactions.
● Interest expense pertains to interest on loans used in connection
with Handy’s trade or business.
● Pension expense pertains to accrual of pension obligation based
on PAS 19.
● Foreign exchange loss pertains to realized and unrealized
losses. Out of the total amount, 20% of the loss from May to
December 31, 2019 was not realized yet. The balance was already
realized during the year. These pertain to trade transactions.

31. Compute the taxable income subject to income tax for

the year ended December 31, 2019.
a.₱ 931,200
b.₱ 614,600
c.₱ 316,600
d.₱ 215,600

32. Compute the taxable income covered by ITH for the year ended
December 31, 2019.

a.₱ 562,000
b.₱ 298,000
c.₱ 614,600
d.₱ 931,200

33. Compute the income tax liability for the year ended December
31, 2019.
a.₱ 118,980
b.₱ 94,980
c.₱ 24,000
d.₱-0-
 34. Compute the income tax savings related to its ITH for the year
ended December 31, 2019.
a.₱ 168,600
b.₱ 94,980
c.₱ 89,400
d.₱ 279,360

Situational 7

Mrs. Masipag with one qualified dependent is engaged in trading and

manufacturing businesses. The following information relates to her
businesses for the year ended December 31, 2019:

Trading Manufacturingng
Sales on account 350,000 370,000
Cash sales during the year 400,000 350,000
Collections of 2019 sales 180,000 150,000
on account
Collections of 2018 sales 220,000 120,000
on account
Purchases on account 100,000 120,000
Cash purchases 90,000 100,000
Payments for 2019 purchases 80,000 75,000
on account
Payments for 2018 purchases 75,000 80,000
on account
Expenses on account 280,000 220,000
Cash expenses 170,000 175,000
Payments for 2019 expenses150,000 120,000
on account
Payments for 2018 expenses120,000 100,000
on account

Mrs. Masipag adopted the cash basis of accounting for her trading
business and accrual basis of accounting for her manufacturing
business. In addition, she opted to use the itemized deductions. There
were no beginning and ending inventories.

35. Compute Part IV.A, Page 2 Item No. 45 of BIR Form 1701-A for
the year ended December 31, 2019.
a.₱ 490,000
b.₱ 340,000
c.₱ 300,000
d.₱ 220,000

36. Compute Part IV.A, Page 2 Item No. 46 of BIR Form 1701-A for
the year ended December 31, 2019.
a.₱ -0-
b.₱ 52,500
c.₱ 18,000
d.₱ 10,000

37. Assuming that Mrs. Masipag adopted the optional standard

deduction, Compute Part IV.A, Page 2 Item No. 45 of BIR Form
1701-A for the year ended December 31, 2019.
a.₱ 480,000
b.₱ 432,000
c.₱ 912,000
d.₱ 726,000
 38. Assuming that Mrs. Masipag adopted the optional standard
deduction, Compute Part IV.A, Page 2 Item No. 46 of BIR Form
1701-A for the year ended December 31, 2019.
a.₱ 50,000
b.₱ 38,000
c.₱ 163,600
d.₱ 111,500

Situational 8

The BIR issued an Electronic Letter of Authority (eLOA) to Andeng

Corporation dated August 1, 2018. The eLOA covered the taxable year
ended December 31, 2016. The BIR issued a Preliminary Assessment Notice
(PAN) on January 15, 2019. Andeng received said PAN on January 25,
2019. Based on the PAN, the BIR assessed Andeng basic deficiency income
tax of ₱5,000,000. Mouse filed its income tax return for the year ended
December 31, 2016 on April 10, 2017.

39. The eLOA should be served to Andeng Corporation on or before:

a. August 16, 2018
b. August 31, 2018
c. September 1, 2018
d. September 29, 2018

40. The BIR should conduct its audit or investigation on or before:

a. November 29, 2018.
b. January 28, 2019.
c. April 28, 2019.
d. August 1, 2019.

41. Until when should Andeng Corporation submit its protest letter
to the PAN?
a. January 30, 2019.
b. February 9, 2019.
c. February 14, 2019.
d. February 24, 2019.

42. Compute Page 1, Part II Item No. 20 of BIR Form 1702-RT as

contained in the PAN (exclusive of compromise penalties) assuming
that Andeng Corporation is expected to settle the tax on February
15, 2019?
a. ₱ 6,387,945.20
b.₱ 6,111,233.00
c. ₱ 7,353,014.00
d.₱ 7,361,233.00
Situational 9

Use the following information for the next four questions:

Abaca Corporation is a domestic corporation engaged in the

business of manufacturing clothing apparel. For the fiscal year
ending March 31, 2020, its income and expenses statement
reported the following:

Sales 200,000,000
Cost of goods sold (120,000,000)
Gross income from operations 80,000,000
Other income 10,000,000
Total Gross Income 90,000,000
Operating expenses 30,000,000
Finance expenses 10,000,000 (40,000,000)
Net Income before income tax 50,000,000
Income tax expenses (9,000,000)
Net Income after income tax 41,000,000

The following additional information was made available for tax

reconciliation purposes:

1. The other income shows the following:

a. Interest income from bank savings deposit
(net of final withholding tax) 400,000

b. Gain from sale of investment property (the

property is held for lease but was not used in 8,000,000
the primary activity of the corporation, gross
of withholding tax amounting to Php 1,800,000)

c. Rental income from investment property 1,600,000

(gross of withholding tax)
2. The withholding tax credit from sale of
clothing materials (supported by BIR form no. 1,200,000
2307)
3. Operating expenses include allowance for bad
debts expense amounting to 1,000,000

4. During the year the corporation has written

off bad debts which are certainly 600,000
uncollectible amounting to
5. Finance expenses is broken down as follows:
a. Interest expense on loan from various 6,000,000
financial institutions

b. Interest expense on loan from a majority 4,000,000

stockholder
6. Income tax expense represents quarterly income
tax paid.
REQUIRED: Compute for the following items:

1. Compute Page 4, Schedule V, Item 4 of BIR Form no. 1702 – RT (net

income per books should refer to net income before income tax).

a.P46,000,000
b.P5,164,800
c.P1,164,800
d.P55,000,000

2. Compute Page 4, Schedule V, Item 9 of BIR Form no. 1702 – RT

a.P400,000
b.P9,000,000
c.P600,000
d.P1,000,000

3. Compute Page 4, Schedule V, Item 10 of BIR Form no. 1702 – RT

a.P45,000,000
b.P9,000,000
c.P600,000
d.P54,000,000

4. Compute Page 2, Item 55 of BIR Form no. 1702 – RT

a.P1,200,000
b.P10,280,000
c.P10,200,000
d.P12,080,000

Situational 10

Use the following information for the next four questions:

In the course of your examination, as a revenue officer, of the

audited financial statements of ABC Corporation which sells and
leases real estate, and by virtue of a Letter of Authority duly
issued by the BIR, the income statement of ABC Corporation on
its first year of operation shows:

Revenues:

Gain on sale of residential lot 750,000

Bank interest income 40,000
Dividend from XYZ Corporation 65,000
Rental income 4,200,000
Total 5,055,000

Expenses:

Salaries and wages 750,000

Depreciation 400,000
Entertainment and representatio 45,000
Office supplies 110,000
Advertising expense 60,000
Interest expense 120,000
Taxes and licenses
250,000
Total 1,735,000
 Net income before income tax 3,320,000
Less: Income tax expenses 616,250
Net income after income tax 2,703,750

The income tax due for the year as computed by ABC shows:

Net income before income tax 3,320,000

Less:
Bank interest income 40,000
Dividend from XYZ Corporation 65,000
Gain on sale of lots 750,000 855,000
Net taxable income 2,465,000
Corporate income tax rate 25%
Income tax expense 616,250

During examination, you observed the following:

1) The balance sheet for the taxable year showed deferred
rent income of P600,000. The payor has properly withheld
the appropriate withholding tax on rentals.
2) The bank interest income is net of 20% final withholding tax.
3) XYZ Corporation is a domestic corporation
4) The gain on sale of residential lots represents gain on
sale of two residential lots with selling price of
P1,600,000 each.
5) Interest expense includes interest on late payment of tax
amounting to P10,000.
6) Entertainment and representation expenses are duly
supported by receipts and are business connected.
7) Taxes and licenses in the notes to Financial Statements showed
the following:
a. Documentary stamp tax on sale of the residential lots –
P60,000
b. Surcharge and penalties on late payment of tax – P40,000
c. Withholding tax on the sale of the lots - P120,000
d. Permits and licenses – P30,000
8) Total assets, excluding land, of the entity are valued at
110M.

REQUIRED: Compute for the following:

1. How much should be reflected in Page 2, Part IV, Item 29 of BIR Form
1702-RT of ABC Corporation’s annual income tax return?
a.P 4,200,000
b.P 3,200,000
c.P 8,000,000
d.P 7,400,000

2. How much should be reflected in Page 3, Part VI, Item 15 of BIR Form
1702-RT of ABC Corporation’s annual income tax return?
a.P 90,000
b.P 130,000
c.P 100,000
d.P 250,000

3. How much should be reflected in Page 3, Part VI, Item 6 of BIR Form
1702-RT of ABC Corporation’s annual income tax return?
a.P 43,000
b.P 37,000
 c.P 45,000
d.P 64,000

4. How much is the basic deficiency income tax still due?

a.P 145,000
b.P 380,000
c.P 143,000
d.P 140,500

Situational 11

Use the following information for the next two questions:

Jokoy Corporation is an export-oriented enterprise registered with the

Subic Bay Metropolitan Authority. Based on its Certificate of
Registration, its Start of Commercial Operations is on 1 January 2022.
Jokoy Corporation’s registered activity involves production of a
robotic spare part that is not locally produced in the Philippines but
is critical to the development of the Philippines‘ automation
industry. Jokoy Corporation successfully secured a Certificate of
Registration and Tax Exemption (CRTE) from PEZA.

During the year. Jokoy imported an assembly machine that will be

directly used in the production of Jokoy’s robotic spare parts. The
assembly machine had a cost of Php 55,000,000, a useful life of ten
years, no salvage value, and is depreciated using the straight-line
method of depreciation.

Jokoy had the following results of operations for the calendar year
2022 as reflected in its audited income statement:

Sale of spare parts Php 124,000,000

Cost of sales (82,300,000)
Gross profit 41,700,000
Administrative expenses (12,000,000)
Selling expenses (6,800,000)
Interest expenses (970,000)
Earnings before taxes 21,930,000

The cost of sales included the depreciation of the imported assembly

machine which was purchased on January 1, 2022. On January 1, 2024,
Jokoy Corporation sold the assembly machine to James Corporation, a
domestic corporation which is not registered with any investment
promotions agency.

1. How much should be reported in Page 1, Part II, Item 18 of BIR Form
1702 – EX for the year 2022?
a.P0
b.P1,096,500
c.P2,085,000
d.P5,482,500

2. Assuming the tax holiday has already expired and the taxpayer
availed of the Special Corporate Income Tax (SCIT), how much is the
tax due?
a.P0
b.P1,096,500
c.P2,085,000
d.P5,482,500
 3. How much is the output tax due in 2022?
a.P0
b.P14,880,000
c.P5,004,000
d.P6,200,000

Situational 12

Your client, Jolly Dimaano, is in the process of selling her real

property to a third-party entity which is engaged in realty business. In
addition, the said real property was not used by Jolly in her business
since she is engaged in buying and selling of automotives. She plans to
sell it for Php 5,000,000.

The fair market value and zonal value of the real property were Php
6,000,000 and Php 3,000,000, respectively. Jolly is concerned as to the
tax consequences of her transaction. As her tax consultant, what will
you advise to Jolly?

a. Jolly should pay donor’s tax with respect to the difference

between the selling price and the fair market value of the real
property.
b. Jolly is liable only to pay documentary stamp tax for the
transfer of ownership to the buyer and therefore she should pay
it.
c. Jolly should pay capital gains tax based on the higher between
the selling price and the fair market value and documentary
stamp tax with respect to the transfer or conveyance of real
property.
d. Jolly should pay income tax for the gain realized from the sale
since the property will be used in the ordinary course of
business and donor’s tax with respect to the difference between
the selling price and the fair market value of the property.

Situational 13

Use the following information for the next four questions:

In 2020, Jay-C, a Filipino social media influencer residing in the

Philippines, received the following income from the following sources:

Within Without
Income from YouTube Partner Program:
Advertising revenue $50,000 -
Channel membership 20,000 -
Super Chats and Super Stickers 10,000 -
YouTube Premium Revenue 5,000 -

Income from other sources:

Income from display advertising Php100,000 $9,000
Income from sponsored social 130,000 4,500
and blog posts
Income from promoting own products 500,000 5,000
Income from photo and video sales 350,000 6,500
Income from podcasts and webinars 300,000 5,000
Foreign tax credit payment $4,500
Relevant foreign exchange rate $1 = Php 50

Under the US tax law, payments from YouTube through the YouTube Partner
Program are considered royalties which are generally subject to tax at
24%. Jay-C did not receive any income other than those listed above
during the year. When he filed his tax return, he opted to avail of tax
credit for taxes paid in the US and claimed the following deductions:

Subscription and software licensing fees Php 250,000

Internet and communication expenses 100,000
Home office expenses 150,000
Office supplies 50,000
Travel or transportation expenses related to300,000
YouTube business
Depreciation expense 250,000
Bank charges and shipping fees 75,000

All expenses were incurred evenly from within and without the
Philippines.

REQUIRED: Compute for the following items:

1. How much would be the tax payable of Jay-C in the Philippines

assuming he is a resident citizen availing the Philippines-US treaty
under Article 13(2)(a)?
a.P1,530,600
b.P1,486,585
c.P1,450,870
d.P1,755,600

2. How much should be reported in Page 1, Part II, Item 22 of BIR Form
- 1701 assuming he is a non- resident citizen?
a.P1,530,600
b.P1,463,600
c. P1,238,600
d.P1,430,600

3. How much should be reported in Page 1, Part II, Item 22 of BIR Form
- 1701 assuming he is a resident alien?
a.P1,530,600
b.P1,463,600
c.P1,238,600
d.P1,430,600

4. How much would be the tax payable of Jay-C in the Philippines

assuming he is a non-resident alien not engaged in trade or business
not availing the Philippines-US treaty under Article 13(2)(a)?
a.P1,530,600
b.P1,407,500
c.P1,463,600
d.P1,238,600
Situational 14

Balsa Company, Inc., a manufacturer of motor vehicles, is an entity

registered with the BOI. It had two registered activities. One activity
pertains to a new product line while the other activity pertains to
expansion of its old product line. These activities enjoyed ITH for the
year ended December 31, 2020. Balsa was registered with the BIR eight
years ago.
The following information relates to these activities:

New Product Old Product

Sales 12,000,000 20,000,000
Cost of sales 4,000,000 3,000,000
Deductions 2,000,000 16,000,000

Balsa produced 1,200 units of its new products and 20,000 units of old
products. Its base figure for its expansion project was 15,000 units
with sales value of P15,000,000. The registered products were
homogeneous products.

1. Determine the taxable income subject to income tax for the year ended
December 31, 2020.
A. P 6.000.000
B. P 6,250,000
C. P 6,750.000
D. P 7.000.000

2. Determine the taxable income covered by ITH for the year ended
December 31, 2020
A. P 6,000,000
B. P 6.250,000
C. P 6,750,000
D. P 7.000.000

3. Determine the income tax liability for the year ended December 31,
2020.
A. P 140,000
B. P 225,000
C. P 255.000
D. P 480.000

4. Determine the income tax savings related to its ITH for the year
ended December 31, 2020.
A. P 1,845,000
B. P 1,245,000
C. P 1.620.000
D. P 1,770.000
SITUATIONAL 15 - tinanong daw to sa october 2021 boards pero sa December
nung nagtake ako waley ‘to. Pero aralin mo na din bes :)

In 2020, Miggy, a Filipino social media influencer residing in the

Philippines, received USD250,000 or P12.5 million from Google LLC, an
enterprise resident of the US, as his share from advertising revenues.
Under the US tax law, payments from YouTube through the YouTube Partner
Program are considered royalties which are generally subject to tax at
24%. Miggy did not receive any other income during the year. When he
filed his tax return, he claimed P1.5 million as deductions and opted to
avail of tax credit for taxes paid in the US.

1. If Miggy does not inform the income payor that he is a resident of

the Philippines. Compute the tax to be withheld on such income
a. P3,750,000
b. P3.000.000
c. P1,875,000
d. P1,250,000

2. If Miggy submits his tax information to Google LLC and proves that he
is a resident of the Philippines, compute the tax to be remitted by
Google LIC
a. P3,750,000
b. P3,000,000
c. P1,875,000
d. P1,250,000

3. How much should be allowed as credit for taxes paid in the US?
a. P3.750,000
b. P3.000,000
c. P1,875,000
d. P1,250,000

4. How much would be the tax payable of Miggy in the Philippines?

a. P3,460,000
b. P2,210,000
c. P 460,000
d. P1,585,000

5. Income of social media influencers other than corporations and

partnerships are generally considered as
a. Compensation income
b. Business income
c. Passive income
d. Capital gains
SITUATIONAL 16

The Yumabong Banking Corporation, a domestic bank, had the following

income and expense items recognized under IFRS for the quarter ended
September 30, 2021 (tax exclusive, if applicable):

Income items:

Dividends 800,000
Equity income in subsidiary 1,000,000
Rentals of property acquired in mortgage foreclosures 4,000,000
Rentals of safety deposit boxes 300,000
Interest on loans with remaining matunties of
Not more than five years 4,000,000
More than five years 6,400,000
Interest income on bank deposit (net of 20% FWT) 800,000
Interest income on bank deposit (net of 15% FWT) 425,000
Net trading gain (net of trading loss of P750,000) 1,350,000

Expense items:
Purchases of supplies and services from 1,050,000
VAT-registered suppliers
Purchases of supplies and services from 800,000
non-VAT registered suppliers

1.Compute the Gross Receipts Tax (GRT) for the quarter ended September
30, 2021.
a. 764,500
b. 580,500
c. 1,354,500
d. 818,500

2.Assume the GRT on interest on loans is passed-on to clients, determine

the GRT for the quarter ended `September 30, 2021.
a. P550,980
b. P496,980
c. P668,980
d. P782,980

3.If the financial institution is not performing quasi-banking

functions, compute the GRT for the quarter ended September 30, 2021.
a. P854,500
b. P654.500
c. P711.500
d. P621.500

4.What is the deadline for filing the quarterly GRT return and payment
of the related tax if Yumabong is under the Electronic Filing Payment
System (eFPS)?
a. October 5, 2021
b. October 15, 2021
c. October 25, 2021
d. October 30. 2021
5.What is the tax return that will be used by Yumabong Banking
Corporation in filing such payment for
Gross Receipts Tax (GRI)?
a. BIR Form 2000
b. BIR Form 2551Q
c. BIR Form 2550Q
d. BIR Form 2552

Situational 17

Use the following information for the next three questions:

A(50%), B(30%), and C(20%), all certified public accountants,

formed a partnership called ABC CPA Firm so that they can
practice their profession as public accountants.

For the year 2021, ABC CPA Firm received earnings and paid expenses,
among which are as follows:

Earnings:
Professional fees from various clients 50,000,000
Cash prize received from a religious society in
recognition of the exemplary service of ABC CPA 5,500,000
Firm
Gains derived from sale of excess computers and 4,000,000
laptops

Payments:
Salaries of office staff Php 10,000,000
Rentals for office space 7,500,000
Representation expenses incurred in meetings 750,000
with clients

In addition, the partners’ personal income and expenses are as

follows:

Partner A Partner B Partner C

Sales 6,000,000 5,500,000 10,000,000
Cost of sales 2,000,000 2,000,000 4,500,000
Gross income 4,000,000 3,500,000 5,500,000
Deductible expense 2,500,000 1,000,000 2,500,000
Dividend from domestic 30,000 150,000 50,000
corporation
Dividend from foreign 70,000 10,000 20,000
corporation
Prize, supermarket raffle 150,000 300,000 250,000
Royalty, books 50,000 20,000 30,000

REQUIRED: Compute for the following:

1. What are the items in the above mentioned earnings which

should be included in the computation of ABC CPA Firm’s gross
income?
a. P50,000,000
b. P55,500,000
c. P54,000,000
d. P59,500,000
 2. What are the items in the above-mentioned payments which may be
considered as deductions from the gross income of ABC CPA Firm?
a. P18,000,000
b. P17,500,000
c. P18,250,000
d. P10,000,000

3. If ABC CPA Firm earns net income in 2021, what is the net income of
the entity for the year assuming the entity elected to use
(1)Itemized deduction;(2)Optional standard deduction?
a. (1)P38,000,000 ; (2)P33,300,000
b. (1)P35,750,000 ; (2)P32,400,000
c. (1)P40,000,000 ; (2)P30,000,000
d. (1)P41,500,000 ; (2)P35,700,000

4. What, if any, is the tax consequence on the part of A as an

individual partner, insofar as the payment of income tax is
concerned assuming the partnership elected OSD and partner A opt to
use (1)Itemized deduction; (2)Optional standard deduction?
a. (1)P6,407,000 ; (2)P7,142,000
b. (1)P5,987,000 ; (2)P6,722,000
c. (1)P5,829,500 ; (2)P6,564,500
d. (1)P5,409,500 ; (2)P6,144,500

Situational 18

1. A PEZA-registered entity engaged as an export enterprise provided

you with the following information on December 31, 2019:

Export sales P45,500,000

Direct costs 27,000,000
Administrative expenses 5,650,000
Marketing expenses 2,720,000
Other operating expenses 1,330,000
Incidental losses 320,000

Additional information:
a. Domestic sales at P24,500,000 with direct cost at P14,700,000
b. Other expenses related to the domestic sale incurred amounted to
P3,206,400

Assuming the tax holiday has already expired and the taxpayer
availed of the SCIT, what is the entity’s total income tax for the
year?

a. P925,000
b. P1,978,080
c. P2,903,080
d. None of the above
SITUATIONAL 19

The financial statements of a taxpayer disclosed P220,000 payable

representing the following internal revenue tax liabilities as of
December 31, 2020:

Value Added Tax - P100,000

Withholding Tax (Expanded)- P5,000
Withholding Tax on Compensation - P15,000
Donor's Tax Payable - P25,000
Income Tax - P75,000

Tax credit certificates recorded under the current assets in the

financial statements, with the unutilized balances below, were
issued by the BIR to the taxpayer:

Date of Issue Unutilized Balance

October 31, 2014 100,000
September 30, 2015 20,000
February 28, 2016 250,000
March 31. 2017 5,000
Total 375,000
The taxpayer opted to utilize all available tax credit certificates
against the tax liabilities. The taxpayer plans to settle the net tax
liability (after applying tax credits) on January 5, 2021.

1. How much is the net amount to be paid by the taxpayer on January 5,

2021?
a. Zero
b. P 20,000
c. P 220,000
d. P 215,000

2. How much is the correct balance of unutilized tax credits to be

recognized in the statement of financial position after applying
the available tax credits in January 5, 2021 payment?
a. Zero
b. P 375,000
c. P 55,000
d. P155.000
SITUATIONAL 20

For the calendar year 2020, 3rd year of operation, X Corporation had the
following data;

Gross Sales 100,000,000

Cost of Sales:
● Direct Materials 30,000,000
● Direct Labor 20,000,000
● Mfg Overhead 10,000,000

Operating Expenses:
● Salaries and Wages 7,000,000
● Taxes 300,000
● Depreciation 3,500,000
● Professional Fees 200,000
● Advertising Expense 3,000,000
● Training Expense 6,000,000
● Office Supplies 500,000

Assume that the prescribed requirements in this section have been

complied with Apprenticeship Agreement, Certification from DepED, CHED
or TESDA whichever is applicable.

1. How much is the Total operating expense?

a. 20,500,000.00
b. 22,500,000.00
c. 23,500,000.00
d. 22,000,000.00

2. How much is the taxable income?

a. 17,500,000.00
b. 19,500,000.00
c. 16,500,000.00
d. 18,500,000.00

3. How much is the tax due?

a. 5,250,000.00
b. 4,125,000.00
c. 4,812,500.00
d. 4,537,500.00
Situational 21

Gaganda Clinic is a dermatological clinic located outside a hospital

which is operated by Gaganda Medical Corporation. The following relates
to its gross receipts for the month of June, 2021:
Diamond peel 100,000
Abdominoplasty 1,300,000
Oxygen treatment 200,000
Breast augmentation 1,500,000
Liposuction 2,000,000
Botox treatment 500,000
The above gross receipts are inclusive of VAT and the applicable excise
tax, if any.
1. Determine the excise tax on excisable services of Gaganda Clinic for
the month ended June 30, 2021.
a. P228,571
b. P204,082
c. P128,571
d. P124,827

2. Assume the gross receipts are exclusive of VAT and excise tax, if
any, and the clinic was operated by Dr. Gaganda. Dr. Gaganda charged
professional fees of P1,600,000, exclusive of VAT and excise tax,
related to excisable services. Determine the excise tax on excisable
services of Dr. Gaganda for the month of June 30, 2021.
a. P400,000
b. P480,000
c. P384,000
d. P320,000

3. Assume the gross receipts are inclusive of VAT but exclusive of

excise tax, if any, and the clinic was operated by Dr. Gaganda. Dr.
Gaganda charged professional fees of P1,600,000, inclusive of VAT but
exclusive of excise tax, related to excisable services. Determine the
excise tax on excisable services of Dr. Gaganda for the month of June
30, 2021.
a. P320,000
b. P285,714
c. P284,192
d. P357,142

4. Assume the gross receipts are inclusive of excise tax, if any, and
the clinic was operated by a hospital. In addition, Dr. Gaganda charged
professional fees of P1,600,000, exclusive of VAT and excise tax,
related to excisable services. Determine the excise tax on excisable
services for the month of June 30 2021.
a. P308,571
b. P320,000
c. P304,762
d. P192,000

5. What return shall be used by Dr. Gaganda in filing her excise tax to
BIR?
a. BIR Form 2200-A
b. BIR Form 2200-AN
c. BIR Form 2200-C
d. BIR Form 2200-I
Situational 22

ITSMARKMARQUEZ IG Corporation, a VAT registered company engaged in the

lease of residential properties. During the first quarter of 2017, the
following
information were made available (all amounts are exclusive of VAT):

● Rental income with monthly rental of P15, 000 per unit,800,000

● Rental income with monthly rental of P13,000 per unit, 600,000
● Rental income with monthly rental of P10,000 per unit, 400,000

● Receivable from tenants as of December 31, 2016, 200,000(60% is VAT

Exempt)
● Receivable from tenants as of March 31, 2017, P300,000 (40% is VAT
Exempt)
● Deferred rent income as of December 31, 2016, P200,000 (60% is VAT
Exempt)
● Deferred rent income as of March 31, 2017, P250,000 (40% is VAT
Exempt)
● Input tax credit on purchase of goods and services for the lst
quarter of 2017, P80,000

1. How much is the output tax due for the 1st quarter of 2017?
A. P164,400
B. P171,600
C. P92,400
D. None

2. How much is the creditable input tax credit for the 1st quarter of
2017?
A. P35,200
B. P80,000
C. P62,629
D. P61,838

3. Assuming that on April 5, 2017, Itsmarkmarquez IG Corporation sold a

residential house and lot for P3,000,000 (VAT exclusive).How much is the
output tax due on its sale of real property, assuming the zonal value of
the property sold is P3,248,000?
A. P348,000
B. P389,760
C. None
D. P360,000

4. When is the deadline for filing of the 1st month of the quarter VAT
return?

A. On the 25th day after the close of the taxable month

B. On the 20th day after the close of the taxable month
C. On the 25th day after the close of the taxable quarter
D. On the 20th day after the close of the taxable quarter
Situational 23

The following sales and their respective input taxes are reported by
Meme Corporation, a VAT-registered business during 2nd quarter of 2019:

-Domestic sales (VAT inclusive) 5,600,000

-Export sales (subject to zero-rated VAT) 3,000,000
-VAT-exempt sales 2,000,000
-Input VAT attributable to:
Domestic sales 360,000
Zero-rated sales 200,000
VAT-exempt sales 60,000
Untraceable input VAT due to purchase of capital 120,000
goods amounting to P1,000,000
Cost of sales 5,916,000
Itemized deductions allowed 2,000,000

In addition, Meme Corporation applied the input VAT attributable to

zero-rated sales for tax refund or issuance of Tax Credit Certificate
(TCC) against the output VAT.

1. Compute Item 19B of BIR Form 2550Q?

a. P 600,000
b. P 561,429
c. P 520,000
d. P 385,714

2. Compute Item 23D of BIR Form 2550Q?

a. P 180,000
b. P 84,000
c. P 420,000
d. P 236,000

3. Compute Item 23C of BIR Form 2550Q?

a. P 180,000
b. P 84,000
c. P 420,000
d. P 236,000

4. Compute Item 29 of BIR Form 2550Q?

a. P 180,000
b. P 200,000
c. P 236,000
d. P 420,000

5. Compute Page 2, Part IV Item No. 41 of BIR Form 1702-RT?

a. P-O-
b. P 625,200
c. P 600,000
d. P 80,000
Situational 24

United Pharma Corporation is considered a large taxpayer and uses the

eFpS for filing its tax returns. It is a VAT registered entity engaged
in manufacturing of medicines. Here are the results of the Company's
operations as of March 31,2019:
Decrease in input VAT on goods (February to March) 550,000
Decrease in input VAT on Services (February to March) 640,000
Decrease in deferred input VAT on capital goods 70,000
(February to March)

Details of VAT payment for February 2019 are as follows:

Output VAT 30,000,000

Input VAT on goods 18,000,000
Input VAT on services 3,500,000
Input VAT on capital goods 70,000

● Mr. Nadoo Ling, the Company's Accounts Payable Officer, recorded

the purchase of packaging materials at Total Invoice amount of
P1,600,000 as purchase of services instead of purchase of goods.
● The Company has unrecorded input VAT on employee reimbursement for
meals and hotel accommodation for business use amounting to P52,000
● The Company has no purchase of capital goods for the month of March
2019.
● The Company made income payments for services rendered by
non-residents subjected to withholding VAT amounting to P140,000.
● Amortization of input VAT on purchases of capital goods greater
than P1,000,000 is P70,000.

In addition, the Company's records of importations for March 2019 are

summarized as follows:

Input VAT on importations recorded per books 17,000,000

Landed cost per Import Entry Document 142,000,000
Dutiable value per import entry document 137,000,000

Furthermore, the Company recorded the following adjustments to correct

the input VAT in February 2019 but only recorded in the books during
March 2019:

Decrease in input VAT on importation - February 2019 100

Unrecorded employee reimbursements - February 2019 10,000
Withholding VAT on services of non-resident 390,000
- February 2019

1. How much is the adjustment to correct the amount of Item 21H of BIR
Form 2550Q for March 2019?
a. P 40,000 increase
b. P 560,000 decrease
c. P 31,440,000 increase
d. P 400,100 decrease
2. How much is the correct amount of item 21D of BIR Form 2550Q to be
claimed for March 2019?

a. P 17,450,000.00
b. P 17,621,428.57
c. P 17,661,428.57
d. P 17,661,528.57

3. How much is the correct combined amount of Item 21] and 21L of BIR
Form 2550Q to be claimed for March 2019?
a. P 2,860,000.00
b. P 2,688,571.43
c. P 2,480,571.43
d. P 2,318,071.43

4. How much is the correct amount of Item 21B of BIR Form 2550Q to be
claimed for March 2019?
a. 0
b. P 70,000
c. P 35,000
d. P 140,000

5. How much is the total amount of Item 24 of BIR Form 2550Q that the
company can claim for March 2019?
a. P 20,420,000
b. P 20,212,000
c. P 20,212,100
d. P 20,211,900