URDANETA CITY

UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT

Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

INCOME TAXATION - MIDTERM EXAMINATION

1. The Philippine income tax system follows a:

a. Global system b. Schedular system c. Semi-schedular system d.Anti-global system

2. Statement 1: Income tax is an excise tax.

Statement 2: Income tax is a personal tax.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
C. Both statements are true.
d. Both statements are not true.

3. Statement 1: Income tax is a national tax.

Statement 2: Considering that the impact and incidence of taxation in income tax rests on the
same person, income tax is considered as a direct tax.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
C. Both statements are true.
d. Both statements are not true.

4. All of the following are sources of exemption or exclusions to income tax, except:
a. The Philippine Constitution b. The Tax Code. c. Special laws d.Local ordinances

5. Which of the following is not a test to determine the timing of taxability of income?
a. Realization Test b. All Events Test c. Immediacy Test d. Claim of Right Doctrine

6. Under the all events test, income is recognized when there is:
a. an available reasonable accurate determination of such income
b. a certain determination as to the amount of such income
c. a probability greater than fifty (50%) that income will accrue
d. a probability greater than ninety (90%) that income will accrue

7. Statement 1: Individuals can only use the calendar vear.

Statement 2: Corporations can only use the fiscal year.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

8. fiscal year is:

a. Any twelve-month period
b. Any twelve-month period that begins on the first day of the week
c. Any twelve-month period that begins on the first day of the month
d. Any twelve-month period that begins on the first day of the quarter

9. Under the accrual method of income recognition

a. Income is recognized when received.
b. Income is recognized when incurred.
C. Income is recognized when earned.
d. Income is recognized when declared.

10. Under BIR regulations, income in long-term construction contracts is recognized through:
a. Percentage of completion method only.
b. Completed contract method only.

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

c. Zero-profit method only. Sd of

d. Either of the above methods at the option of the taxpayer.

11. Instalment basis of reporting of income shall apply to casual sale of personal property upon
compliance with all of the following requisites, except:
a. The price exceeds P1,000.
b. The property would not be included in the inventory of the taxpayer if on hand at the end of
the taxable year.
c. The price will be paid in at least three (3) installments.
d. Initial payments do not exceed 25% of the selling price.

12. Sana is a resident citizen, Tzuyu is a non-resident citizen, while Mina is a resident alien. Who
among them is subject to income tax on income derived from sources within and outside the
Philippines?
a. Sana only.
b. Sana and Tzuyu only.
C. Sana and Mina only.
d. Sana, Tzuyu, and Mina.

13. Momo is a resident citizen, Nayeon is a non-resident citizen, while Dahyun is a resident alien.
Who among them is subject to income tax only on income derived from sources outside the
Philippines?
a. Momo only.
b. Nayeon only.
C. Dahyun only.
d. Neither Momo, Nayeon, or Dahyun.

14. Big Hit Corporation is a domestic corporation. Which of the following items of income is
subject to tax?
I. Gain from sale of personal property in the Philippines.
II. Gain from sale of personal property in South Korea.
a. I only.
b. II only.
c. Both I and I.
d. Neither I nor II.

15. JYP Corporation is a resident foreign corporation. Which of the following items of income is
not subject to tax?
1. Income from Philippine operations
2. Income from American operations
a. I only.
b. II only.
c. Both I and I.
d. Neither I nor II.

16. The situs of service income is:

a. Where the payment for services is made
b. Where the service contract was perfected
c. Where the services are performed
d. Where the party availing of the services is located

17. The situs of income from sale of real property is determined by:
a. The place where the real property is located.
b. The place where the registered owner of the real property resides.
The place where the current possessor of the real property has citizenship.

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 URDANETA CITY
UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

d. The place where the deed of sale of real property was notarized.

18. Statement 1: If an income is already subjected to creditable withholding tax, it is no longer

reported as part of gross income subject to regular income tax.
Statement 2: If an income is already subjected to final withholding tax, it is reported as part of
gross income at an amount net of the amount of tax withheld.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
C. Both statements are true.
d. Both statements are not true.

19. Assuming the taxpayer follows the calendar year, the deadline for the filing of the second
quarter Quarterly Remittance Return of Creditable Income Taxes Withheld (BIR Form No.
1601EQ) is:
a June 30
b. July 15
c. July 31
d. August 15

20. Interest income of resident citizens from short-term currency bank deposits is subject to a
final withholding tax rate of twenty percent (20%). As a result,
a. Such interest income need not be declared as part of the gross income of the resident
citizen taxpayer in his/her annual income tax return.
b. Such interest income should still be declared as part of the gross income of the resident
citizen taxpayer in his/her annual income return, but in an amount net of the withholding tax.
c. Such interest income should still be declared as part of the gross income of the resident
citizen taxpayer in his/her annual income tax return in an amount gross of the withholding tax,
with a claim income tax credit.
d. Such interest income should still be declared as part of the gross income of the resident
citizen taxpayer in his/her annual income tax return in an amount gross of the withholding tax,
without a claim of income tax credit.

21. Final withholding tax is:

a. An approximation of the income tax due.
b. Deductible against gross income to compute for the taxable income.
c. The full and final payment of income tax due.
d. Creditable against income tax due to compute for the income tax payable.

22. Based on the scheduler rate of individual income taxation, how much annual income is
exempted from income tax?
a. P250,000
b. P500,000
C Pl,000, 000
d. Pl,500,000

23. The final withholding tax rate for the royalty income of resident citizen coming from his
books, literary works and musical compositions?
a. 10% b. 15% c. 20% d. 25%

24. What is the final withholding tax rate for the gross income of a non- resident alien not
engaged in trade or business?
a. 10% b. 15% c. 20% d. 25%

25. How much prize income from within of a citizen or resident alien is subject to ordinary
income tax of 20%-35%?

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

a. P10,000 b. P50,000 c. P100,000 d. P500,000

26. What is the final withholding tax rate of cash dividend income of a non-resident alien
engaged in trade or business?
a. 10% b. 15% c. 20% d. 25%

27. Which income of a minimum wage earner is subject to incomet

a. Holiday pay b. Overtime pay C. Night shift differential pay d. None of the above

28. When is a non-resident alien considered engaged in trade or business in the Philippines?
a. If he stays in the Philippines for a period of at least 180 days during the year
b. If he stays in the Philippines for a period of at least 181 days during the year
C. If he stays in the Philippines for a period of at least 182 days during the year
d. If he stays in the Philippines for a period of at least 183 days during the year

29. What is the final tax rate on royalty income from music and literary
compositions received by Resident Citizens from within Philippine
sources?
a. 10% b. 20% c. 7.5% d. 25%

Situational Problem No.: For items 30 to 33, refer to the following situation:
A taxpayer received the following items of income during the taxable year
2021:

Intere income from BPI - Espana Branch from checking account

62,000.00

Interest income from BDO - Intramuros Branch from savings deposit

38,500.00

Interest income from PNB - Quiapo Branch from foreign currency deposit
account under the expanded currency deposit system 42,000.00

Interest income from dollar deposit on Bank of New Jersey in the United
States 130,000.00

Interest income from promissory note of Mr. X, Philippines

58,400.00

Interest income from promissory note of Mr. X, United States

62,000.00

Yield from deposit substitute, Philippines

87,000.00

Interest from Philippine government securities

21,000.00

Interest income from long-term deposits, Philippines

57,000.00

Interest income from long-term deposits, Egypt

62,500.00

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 URDANETA CITY
UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

Royalties from books, Philippines

16,000.00

Royalties from paintings, Philippines

60,000.00

Royalties from musical compositions, Japanpo

50,000.00

30. If the taxpayer is a resident citizen, how much is the final withholding tax?
a. 57,400 b. 61,600 c. 63,200 d. 66,600

31. If the taxpayer is a resident citizen, how much income is subject to income tax?
a. 300,400 b. 312,900 c. 304,500 d. 362,900

32. If the taxpayer is a non-resident citizen, how much is the final withholding tax?
a. 37,900 b. 51,100 c. 55,300 d. 61,600
68. If the taxpayer is a non-resident citizen, how much income is subject to regular income
tax?
a. 58,400 b. 100,400 c. 108,400 d. 120,400

33. The principal purpose of taxation is

a. To encourage the growth of home industries through the proper use of tax exemptions and
tax incentives
b. To implement the police power of the state
c. The roduce excessive incqualities of wealth
d To raise revenues for governmental noeds

34. The aspects of taxation are

a. Legislative in character
b. Executive in character
c. Shared by the legislative and executive departments
d. Judicial in character

35. Taxation as distinguished from police power and power of eminent domain
a. Property is taken to promole the general welfare
b Maybe exercised only by the govenment
c. Operates upon the whole citizenry
d There is generally no limit as to the amount that may be imposed

36. Which of the inherent powers may be exercised even by public service corporations and
public entities
a. Power of taxation b. Police power c. Power of eminent domain d. A and C

37. Which of the following statements is correct?

a. Income tax is an indirect tax
b. Our National Internal Revenue Laws are criminal in nature.
c. The theory of taxation states that the power of taxation is supreme, plenary, unlimited, and
comprehensive.
d. Taxtion is subject to inherent and constitutional limitations.

38. This is an inherent limitation on the power of taxation

a. Rule on uniformity and cquity in taxation
b. Due process of law and oqual protection of the laws
c. Non-impairment of the jurisdiction of the Supreme Court in tax cases
d. Tax must be for public purpose

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 URDANETA CITY
UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

39. This is a constitutional linitation on the power of taxation

a. Tax ļaws must be applicd within the territorial jurisdiction of the state
b. Exemption of govemment agencies and instrumentalities from taxation
c. No appropriation of public moncy for religious purposes
d Power to tax cannot be delegated to private persons or entities

40. The power to acquire private property upon payment of just compensation for public
purpose
a. Power of taxation
b. Police power
c. Power of eminent domain
d. Power of love

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