DE LA SALLE UNIVERSITY (DLSU) Short Quiz 6

Taxation (INTAXTN) Second Term 2018-2019

Set A February 25, 2019

Name: ________________________________________________________________ Section: __________

Answers
1. 6. 11. 16.

2. 7. 12. 17.

3. 8. 13. 18.

4. 9. 14. 19.

5. 10. 15. 20.

Instruction: Choose the letter of the best answer from the given choices. University policies on
academic honesty as stated and inferred in the student handbook are strictly enforced.

1. The following income payments are subject to EWT regardless of whether the payor is a top withholding
agent or not, except:
a. Rental payments for lease of real property.
b. Professional fees of doctors.
c. Purchases of office supplies.
d. Commissions of insurance broker.

2. The following income payments are not subject to EWT, except:

a. Payments for advertising services rendered by media supplier.
b. Fees paid by government agencies for laborers having annual gross receipts not exceeding P250,000.
c. Payments made by a private company to a security agency for the salaries of security guards.
d. Consultancy fees paid to a non-resident foreign corporation for services rendered outside the
Philippines.

3. Which of the following income payments are not subject to the 2% EWT?
a. Payments to building contractors.
b. Payments to printers.
c. Payments to janitorial agency.
d. Payments to customs broker.

4. The following income payments to a juridical entity are subject to 15% EWT if said juridical entity’s gross
income exceeds P720,000, except:
a. Talent fee of artists.
b. Professional fee for tax services of a general professional partnership.
c. Consultancy fee for consultancy services.
d. Service fee for bookkeeping services.

5. Which of the following income payments is subject to EWT at the time of payment?
a. Advance payment to a computer services provider.
b. Rental payment made after the due date.
c. Purchase of car on account by a car dealer classified as top withholding agent.
d. Accrued consultancy fee payable to an individual practitioner.

Use the following problem for the next two questions:

Mr. Gullfaxi supplies special pastries to Cheapest Grocery Store, a top withholding agent as notified by the
BIR. The following were Mr. Gullfaxi’s sales transactions to Cheapest for the year ended December 31, 2018:

January P60,000
April 50,000
June 70,000
August 80,000
October 75,000
November 100,000
December 125,000
 6. How much EWT should be withheld and reported by Cheapest for the quarter ended September 30, 2018?
a. P-0-.
b. P800.
c. P1,600.
d. P4,000.

Answer: P80,000 x 1% = P800

BONUS 7. How much EWT should be withheld and reported by Cheapest for the quarter ended December 31, 2018?
a. P1,250.
b. P3,000.
c. P6,000.
d. P15,000.

Answer: (75+100+125) X 1%

8. Assuming Cheapest used corporate credit to pay Mr. Gullfaxi, how much EWT should be withheld and
reported by Cheapest for the quarter ended June 30, 2018?
a. P-0-.
b. P1,200.
c. P2,400.
d. P6,000.

Use the following problem for the next two questions:

Rumpelteazer Trading Company leased an equipment from Skimbleshanks Leasing Corporation for P10,000
monthly for three months which commenced on May 1, 2018. The rentals were paid in advance at the
commencement of the lease. However, the lease agreement was extended for another three months when the
lease expired on July 31, 2018. The rentals were also paid in advance at the time of extension.

9. How much EWT should be withheld and reported by Rumpleteazer for the quarter ended June 30, 2018?
a. P-0-.
b. P600.
c. P1,000.
d. P1,500.

Answer: (P10,000 x 3) x 5% = 1,500

10. How much EWT should be withheld and reported by Rumpleteazer for the quarter ended December 31,
2018?
a. P-0-.
b. P600.
c. P1,000.
d. P1,500.

11. In case of conflict between the tax laws and the generally accepted accounting principles, which of the
following is correct?
a. Both tax laws and GAAP shall be enforced.
b. GAAP shall prevail over tax laws.
c. Tax laws shall prevail over GAAP.
d. The issue shall be resolved by the Court of Tax Appeals.

12. Which of the following methods is allowed for purposes of calculating the taxable income of a taxpayer
engaged in construction business?
a. Accrual basis.
b. Percentage of completion.
c. Completed contract.
d. Any method provided approved by the BIR.

13. The following taxpayers must report their income following the cash basis of accounting, except:
a. Convenience store keeping its records under the cash receipts and disbursements method.
b. Peddler without books of accounts and records.
c. Jeepney operator with inadequate books of accounts and records to determine taxable income.
d. Farmers with books of accounts and records.
14. The following may elect to report income on installment basis, except:
a. Car dealer selling cars on installment.
b. Real estate dealer selling condominium unit on installment.
c. Convenience store selling consumable goods on installment.
d. Manufacturer selling used equipment on installment.

15. A manufacturer, adopting the fiscal year accounting period ending June 30, intends to change its
depreciation method from straight-line method to sum-of-the-years digits method effective July 1, 2018.
When should its application for change be approved by the BIR?
a. July 1, 2018.
b. August 30, 2018.
c. September 28, 2018.
d. September 30, 2018.

Use the following problem for the next two questions:

Peter Piper Corporation is engaged in the manufacture of beverages. It sold a delivery truck on July 1, 2018 on
installment for P1,000,000, with downpayment of P200,000. The balance was payable annually over four years
(every July 1) for P200,000. The truck was acquired on January 1, 2017 for P1,200,000 and it was depreciated
for five years using the straight-line method of depreciation. Peter Piper opted to declare the gain from said
sales transaction on installment, if allowed.

16. How much gain should be reported for the year ended December 31, 2018 for the sale of the delivery
truck?
a. P-0-.
b. P32,000.
c. P160,000.
d. P200,000.

17. Assuming Peter Piper changed its depreciation method to sum-of-the-years digits starting January 1,
2018, how much gain should be reported for the year ended December 31, 2018 on the sale of the
delivery truck?
a. P520,000.
b. P376,000.
c. P104,000.
d. P75,200.

18. On January 1, 2017, Mr. Wright purchased a car for P800,000 which he used for personal purposes. He
expected to use the car for five years. He sold the car on December 1, 2018 for P1,000,000 on installment
with downpayment of P200,000. The remaining balance was payable every January 1 over four equal
annual installments. How much gain should be reported by Mr. Wright for the year ended December 31,
2018 assuming, he opted to declare the gain on installment?
a. P200,000.
b. P100,000.
c. P40,000.
d. P20,000.

Use the following problem for the next two questions:

Heany Corporation is engaged in the business of raising dairy livestock. The following information were
contained in its accounting records relating to its dairy livestock which were recognized under PAS 41 as of
and for the year ended December 31, 2018:

Carrying amount, January 1 P10,000,000

Purchases (at cost) 4,000,000
Gain from change in fair value less cost of
800,000
disposal attributable to price change
Gain from change in fair value less cost of
1,200,000
disposal attributable to physical change
Livestock sold at carrying amount 5,700,000
Harvested livestock 400,000
The beginning inventory of livestock had cost of P7,000,000 while its ending inventory had a cost of
P8,500,000. Livestock sales were P7,500,000 cash.

19. How much gross income should be declared by Heany for the year ended December 31, 2018 under the
cash method of accounting?
a. P5,000,000.
b. P3,500,000.
c. P1,800,000.
d. P1,400,000.

20. How much gross income should be declared by Heany for the year ended December 31, 2018 under the
accrual method of accounting?
a. P5,000,000.
b. P3,500,000.
c. P1,800,000.
d. P1,400,000.