Exercises – Tax 1

1. Mr. Baba Lu, married with 6 children aged 13-21 all single, furnished you the following information
about his income and expenses for year 2023:
- Salaries of Mr. Lu P300,000
- Representation allowance of Mr. Lu 60,000
- Salaries of his wife 240,000
- Rentals received by Mr. Lu 36,000
- Dividends from Government owned corporation 4,000
- Sweepstakes winning 50,000
- Sickness benefits from SSS 5,000
- Dividends from domestic corporation 30,000
- Gain on sale of shares of stock with book value of P50,000,
Sold inside stock market 5,000
- Interest on government bond 5,000
- Salaries of Vhong, eldest son 36,000
- Dividend from non-resident foreign corporation 20,000
- Transportation expenses of Mr. Lu 18,000
- Interest paid on car loan 12,000
- Interest on delinquent tax 4,000
- Surcharge on delinquent tax 10,000
- Tuition fees of children 15,000
- Payment for medical expenses of wife 2,400
- Contribution to government for public purpose 5,000
- Contribution to government for priority program 5,000
- Documentary stamp taxes 1,000
- Motor vehicle registration fee 1,200
- Real property tax of residential house & lot 1,800
- Bad debts (actual uncollected rent, part of reported
Rental received) 5,500
- Income tax withheld, husband 50,000
- Income tax withheld, wife 40,000

Required:
1. Income tax payable of the spouses
2. Final tax on passive income

2. Ms. Ma. Yaman, a resident citizen, operates a manufacturing business. She owns the piece of land and
building where she conducts manufacturing operations. However, marketing activities are in a building
that she is renting in the shopping center of the metropolis. In a year, data on operations follow:
Sales 50,000,000
Cost of Sales 30,000,000
Gross Profit from sales 20,000,000
Depreciation of building – manufacturing (based on cost) 200,000
Amortization of Patents 300,000
Contributions to a pension fund set up during the year:
 For past service cost 2,000,000
For present service cost 50,000
Provision for bad debts (write off during the year
Was P60,000) 70,000
Research and development costs, with benefits to be
Received from it beginning the second semester of the year
(to be treated as deferred charges) 1,000,000
Expenditure for leasehold improvements on rented
Building (with useful life of 30 years, and remaining term
Of the lease of 20 years) 1,200,000
Contributions:
To the government, for a priority activity in housing 200,000
To the Quiapo Catholic Church 5,000
To NGOs organized and operated for charitable purposes 500,000
To rape victims 12,000
Other expenses of operations 10,000,000

Required: How much is the taxable income assuming Ms. Ma. Yaman claims deductions using:
a.Itemized
b. Optional Standard Deduction

3. Yale Corporation provided the following information for the current taxable year:
Gross sales on business 5,000,000
Sales returns and discounts 50,000
Cost of goods sold 2,300,000
Total itemized operating expenses 1,800,000
Sale of capital assets – long term 1,000,000
Cost of capital assets sold 1,200,000
Interest income from bank deposit, net of tax withheld 48,000
Dividends received from domestic corporation 80,000

The corporation correctly paid the income tax liability during the year.

Required: Compute the following:

1. If itemized deduction was adopted
a. the corporate income tax due
b. the amount of improperly accumulated earnings
2. If OSD was used
a. the corporate income tax due
b. the amount of improperly accumulated earnings