MIDTERM EXAMINATION

Constitutional Inherent
1. Which of the following does not give rise to short accounting Limitation Limitation
period? a. Territorial jurisdiction Yes Yes
a. When the corporation is newly organized and is using b. International comity Yes No
c. Rule of uniformity and No No
fiscal year.
equity
b. When a corporation is dissolved d. Due process of law Yes No
c. When a corporation changes accounting period
d. When taxpayer dies 8. The equitable recoupment tax doctrine allows the application
of tax credit or refund to unsettled tax liabilities, except
2. Which of the following dividends shall be considered as a. Taxes involved are totally unrelated.
income not from surces within the Philippines? b. Tax credit or refund is prevented by prescription.
a. Dividends from a domestic corporation c. Both claims are already due and demandable.
b. Dividends from a foreign corporation where less than d. Choices “a” and “b.”
fifty percent (50%) of the gross income of such
9. The request for approval of the change in accounting period
corporation for the three-year period preceding the
should be filed at anytime not less than how many days prior
declaration of such dividends was derived from sources
the beginning of the proposed accounting period?
within the Philippines.
a. Fifteen days
c. Dividends from a foreign corporation where more than
b. Thirty days
eighty-five percent (85%) of the gross income of such for
c. Sixty days
the three-year period preceding the declaration of such
d. Ninety days
dividends was derived from sources within the
Philippines. 10. The certification approving the adoption of the new
d. None of the above accounting period must be release within how many working
days from the date of receipt of the complete documentary
3. Which of the following shall be treated as derived entirely
requirements?
from sources without the Philippines?
a. Fifteen days
a. Gains, profits and income derived from the purchase of
b. Thirty days
personal property within and its sale without the
c. Sixty days
Philippines.
d. Ninety days
b. Gains, profits and income derived from the purchase of
personal property without and its sale within the 11. The taxable income shall be computed on the basis of the
Philippines calendar year under which of the following?
c. Gain from the sale of shares of stock in a domestic a. If the taxpayer’s annuals accounting period is other than
corporation regardless of where the said shares are sold. a fiscal year
d. All of the choices b. If the taxpayer has no annual accounting period, or does
not keep books
4. The payment received in cash or property excluding evidence
c. If the taxpayer is an individual
of indebtedness due and payable in subsequent years by the
d. All of the above
purchaser during the taxable year in which the sale or other
disposition is made. 12. Which of the following statements is incorrect?
a. Selling price a. If a taxpayer, other than an individual, changes the basis
b. Contract price of computing net income from fiscal year to calendar
c. Down payment year, with the approval of the Commissioner, a separate
d. Initial payment final or adjustment return shall be mad for the period
between the close of the last fiscal year for which return
5. Which of the following is not true?
was made and the following December 31.
Taxation Police Eminent
power Power Domain b. If the change is from calendar year to fiscal year, a
a. Inherent to the separate final or adjustment return shall be made of the
existence of the Yes Yes Yes period between the close of the lase calendar year for
government which return was made and the date designated as the
b. Not legislative in nature No No No close of the fiscal year.
c. Superior to the non- c. If the change is from one fiscal year to another fiscal
impairment clause Yes Yes No
year, a separate final or adjustment return shall be made
d. Restricted by just
compensation No No Yes for the period between the close of the former fiscal
year and the date designated as the close of the new
6. Which of the following interests shall be considered as fiscal year.
income from sources within the Philippines? d. None of the above.
a. Interests derived from sources within the Philippines.
b. Interests on bonds and notes of residents, corporate or
otherwise
13. One of the following is a true classification of tax.
c. Interests on other interest-bearing obligations of
As to As to
residents, corporate or otherwise. Object Who bears the burden
d. All of the above a. Income tax Personal Indirect
b. Value-added tax Excise Direct
7. Which of the following is a correct nature of restriction to c. Donor’s tax Excise Direct
exercise taxation power? d. Estate tax Property Indirect
 MIDTERM EXAMINATION
14. One of the following is taxable in the Philippines.
a. Salaries of officials of the UN assigned in the Philippines
paid by the UN and certified by the Secretary General of
the UN.
b. Income of citizens of the USA working in consular offices
in the Philippines
c. Salaries of diplomatic officials and agents assigned in the
Philippines
d. Salaries of non-resident employed by a foreign
petroleum service contractor in the Philippines.
15. T inquired to the BIR whether or not he will be covered with
the new tax law. The BIR issued an administrative ruling that
his activities are not covered by the new tax law. As a result, T
did not pay his tax for several years based on the said BIR
ruling.
Currently, the BIR Commissioner found out that the previous
ruling was erroneous and reversed the same with a new BIR
ruling. The BIR then issued tax assessment against T for
purposes of collecting back taxes.
Is the tax assessment against T correct?
a. Yes, because the previous BIR ruling was corrected and
the activities of T should have been taxable.
b. Yes, because the ruling of the BIR Commissioner must be
final.
c. No, because T is covered by the first BIR ruling and its
reversal is a violation of his constitutional rights.
d. No, because reversal of BIR ruling shall not be
retroactive in application especially if the ruling is
prejudicial to the taxpayer.
16. The following are the powers and duties of the Bureau of
Internal Revenue, except
a. To decide all tax cases.
b. To assess and collect national internal revenue taxes,
fees and charges.
c. To enforce all forfeitures, penalties and fines connected
to taxes.
d. To effect and administer the supervisory and police
powers conferred upon it by the Tax Code and other
special laws.
17. The following instances allow the BIR Commissioner to
inquire or examine the bank deposits of taxpayers, except
a. To determine the gross estate of a decedent.
b. When the taxpayer filed an application for compromise
of his tax liability
c. The taxpayer waives his right in writing the
confidentiality of the bank deposits.
d. When the taxpayer failed the lifestyle check test and
shows unexplained wealth.
18. Which of the following persons are not required to file
quarterly income tax return and pay quarterly income tax?
a. Individuals earning purely compensation income
b. Self-employed individuals
c. Corporations and commercial partnerships
d. Estates and Trusts
19. Until when is an individual allowed to amend his tax return or
file a supplemental return which is not under investigation?
a. Within three (3) years from its submission
b. Within two (2) years from its submission
c. Within one (1) year from its submission
d. Within six (6) months from its submission
20. Which of the following is correct?
a. No return shall be made for a period of more than
twelve months.
b. A separate return for a fractional part of a year is
required whenever there is a change, with the approval
of the Commissioner, in the basis of computing the net
income from one taxable year to another taxable year.
c. The requirements with respect to the filing of a separate
return and the payment of tax for a part of a year are
the same as for the filing of a return and the payment of
tax for a full taxable year closing at the same time.
d. All of the above
21. It refers to assessment made by the BIR Officer without the
benefit of complete or partial audit because of taxpayer’s
failure to comply with BIR requirements.
a. Self-assessment
b. Official assessment
c. Jeopardy assessment
d. Final assessment
22. It is an action to contest the validity of an assessment
whereby the taxpayer appealed to the BIR to review their
decision based on the newly submitted evidence.
a. Motion for reconsideration
b. Motion for reinvestigation
c. Motion for withdrawal
d. Motion for cancellation
23. The RDO of Baguio City issued a tax assessment to Mr. Lang
amounting to P500,000. Mr. Lang filed protest with 60 days
and submitted proofs 10 days thereafter. Which of the
following statement is correct?
a. The BIR can deny the protest of Mr. Lang because the
30-day period to file a protest against tax assessment
has been prescribed.
b. Mr. Lang is obligated to pay the P500,000 assessed
against him.
c. Mr. Lang can ask BIR for a compromise since the case
has not been filed in court, or not those involving fraud.
d. All of the above.
24. Mr. A, a resident Filipino, filed his 2009 income tax return on
May 31, 2010. The BIR issued an assessment to Mr. A on May
15, 2013 for tax deficiency. Mr. A protested the assessment
arguing that the three-year assessment period has already
expired beginning from April 15, 2010.
a. The BIR is correct because the three-year period should
start from May 31, 2010.
b. The BIR is correct because there is no limit on the power
of the Commissioner to assess tax.
c. Mr. A is correct because the last day to file his 2009 ITR
should be April 15, 2010 and the last day of the three-
year period to make an assessment is on April 15, 2013.
d. Mr. A is not correct because prescriptive period could
never be a good defense against assessment, but
submission of evidence.
25. Mr. Goma, a resident Filipino, earned P200,000,000 from
2003 to 2006 but did not file his income tax returns. The BIR
discovered the recurrence of tax evasions in April 30, 2016
and filed charges in court without assessment given to Mr.
Goma. Mr. Goma argued that there was no due process
because he was not informed of his violation. Furthermore,
he argued that the assessment period has been expired
because the discovery was made after 10 years.
a. Mr. Goma’s arguments are correct.
b. There was no tax evasion because the violation was only
nonfilling of tax returns.
c. The BIR should have first send a notice of assessment to
Mr. Goma.
d. The BIR is correct for bringing to court the case even
without assessment and even the discovery was made
after 10 years.
26. Mr. X’s real property was under levy and subsequently sold
by the BIR to Mr. Y. Which of the following statements is not
correct?
 MIDTERM EXAMINATION
a. Mr. Y should be in possession of the property and enjoy
all benefits as the new owner of the property from the
date of sale.
b. Mr. X shall not be deprived of the possession of the said
property and he shall be entitled to the income within
the redemption period.
c. Mr. X may redeem the property within 1 year subject to
interest of 15% per year based on the purchased price.
d. Mr. Y’s title of ownership is only conditioned until the
redemption period expires.
27. Which of the following statements is not correct?
a. Under forfeiture, excess of proceeds derived from sale
of the property forfeited is returned to the taxpayer.
b. In tax lien, the excess of proceeds derived from sale after
deducting the required tax, surcharge, interest and
expenses is returned to the taxpayer.
c. The tax lien may follow the property into the hands of
third party if there is notice of such lien.
d. All of the above.
28. Statement 1: The taxpayer need not to issue a waiver of
confidentiality of his bank deposit in writing once he
requested for a compromise settlement due to financial
incapacity.
Statement 2: The BIR Commissioner can nullify the
compromise agreement based on findings that the taxpayer
has sufficient bank deposit to cover his tax liability and the
related increment.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are not correct.
29. Which of the following is not correct?
a. Businesses with quarterly receipts of more than P50,000
per quarter are required to keep journal and ledger.
b. Businesses with quarterly receipts exceeding P150,000
are required to have their books of accounts audited by
independent CPA.
c. The books of accounts are to be preserved for three
years from the last entry date.
d. The books of accounts are to be registered with the BIR
after the last entry.
30. T filed his income tax return and paid the corresponding
income tax for the year 2002 on April 1, 2003. As of April 15,
2010, T received a notice of assessment from the BIR
demanding for the settlement of T’s alleged deficiency
income tax amounting to P425,000 including its simple
neglect surcharge and interest.
Which of the following is not correct?
a. T can protest payment on the ground of prescription
because the right to the government to assess is three
years commencing from when the tax is due or when it
was it actually paid whichever comes later.
b. The BIR can still collect T’s tax deficiency because taxes
are not cancellable due to the Lifeblood Doctrine.
c. The BIR can still assess and collect T’s tax deficiency
within 10 years if the basis of tax deficiency involved a
fraudulent tax return or there was no tax return filed at
all.
d. The government can no longer invoke the Lifeblood
Doctrine on Taxation because the prescriptive period to
assess has already expired.
31. X, a domestic corporation, provided the following information
regarding its appeal for tax refund:
Date of income tax erroneously
paid (overpayment) April 15, 2008
Date of claim for refund was filed with BIR May 20, 2010
No decision on the claim of refund was made by the BIR
In the given information, what is your assessment regarding
the claim for tax refund of X Corporation?
a. No tax refund can be claimed by X Corporation because
the period to claim tax refund has already expired (after
two years) when the claim for tax refund was made.
b. X Corporation can still claim for tax refund for as long as
there is an appeal made to the CTA within 30 days after
the expiration of 180 days after the filing for tax refund
on May 20, 2010.
c. X Corporation can appeal for a compromise for tax
refund for at least 40% of its tax refund claim.
d. A refund can still be claimed if it is made in writing and
published in Official Gazette.
32. Mr. X has excess quarterly income tax payment in 200A which
he applied as tax credit carry-over against his income tax
liability in the 200B first quarter. There is still substantial
amount left on the excess tax payment, so he decided to
apply for tax refund in 200B second quarter.
a. Mr. X should receive a tax refund from the BIR because
he applied for tax refund within 2 years.
b. Mr. X could only apply the excess income tax payment as
tax credit because he already applied the portion of it as
tax credit carry-over on the first quarter.
c. The remaining balance of excess tax payment could not
be applied for tax credit carry-over or tax refund.
d. Mr. X can only as to convert the excess tax payment into
tax credit certificate.
33. One of the following is not an example of constructive receipt
of income:
a. Partner’s distributive share in the profit of a partnership
b. Interest credited to the account of a taxpayer and which
he may withdraw at anytime
c. Interest coupons which have matured
d. Corporation contingently credited stock bonus, but the
stock is not available to the employee until some future
date.
34. Guidant Resources Corporation, a corporation registered
in Norway, has a 50 MW electric power plant in San Jose,
Batangas. Aside from Guidant's income from its power
plant, which among the following is considered as part
of its income from sources within the Philippines?
a. Gains from the sale to an Ilocos Norte power plant of
generators bought from the United States.
b. Interests earned on its dollar deposits in a Philippine
bank under the Expanded Foreign Currency Deposit
System.
c. Dividends from a two-year old Norwegian subsidiary
with operations in Zambia but derives 60% of its gross
income from the Philippines.
d. Royalties from the use in Brazil of generator sets
designed in the Philippines by its engineers.
35. Mr. W, a watch dealer, sold second hand watches by
installment for P1,000 each. The initial payment is 30% and
the remaining balance is payable within 2 consecutive years.
He presented his income tax return to the BIR paying the
related tax by installment. The BIR Assessor refused to accept
the installment payment because the selling price does not
exceed P1,000. Is the BIR Assessor correct?
a. Yes, because the selling price does not exceed P1,000
per watch.
b. Yes, because the initial payment exceeds 25% of the
selling price.
c. No, because the watches sold are part of Mr. W’s
inventory thereby the sale is a regular sale of personal
property. The rules on 25% initial payments and P1,000
selling price should not be applied.
d. No, because the selling price does not exceed P1,000 per
watch sold.
 MIDTERM EXAMINATION
36. When there are no beginning and ending inventories of farm
crops harvested, which of the following is true?
Cash Method Accrual Method
a. Income is Greater Lesser
b. Expense is Lesser Greater
c. Income is The same The same
d. Expense is Greater Lesser
37. In 200B, the BIR discovered and ascertained that Y, a
domestic corporation engaged in business of leasing real
properties, underdeclared its rental income amounting to
P1,000,000 in 200A. Y denied having received or earned the
amount as unreported income for 200A explaining that part
of the said amount totaling P600,000 was collected by its
president who did not turn the same to the corporation in
200A and the remaining P400,000 was advanced payments by
tenants for 200C.
a. The entire P1,000,000 should be reported as income in
200A.
b. Only P600,000 is to be reported as income in 200A and
the remaining P400,000 is to be reported in 200C.
c. The P600,000 is to be reported only when the president
turn over it to the corporation.
d. Only P400,000 is to be reported in 200A because there is
an actual cash collection made by the corporation.
38. XYZ Co. took two insurance policies on the life of its
President, Mr. A. In one policy, the beneficiary is the
corporation to compensate it for its expected loss in case of
death of its president. The other policy designates Mr. A’s
wife as its irrevocable beneficiary.
Question 1 – Are the insurance premiums paid by XYZ Co. in
both policies deductible?
Question 2 – Will the insurance proceeds be treated as
income subject to tax by the corporation and by the wife?
a. Yes to 1st and No to 2nd questions.
b. Yes to both questions.
c. No to 1st question and Yes to 2nd question.
d. No to both questions.
39. Ganda is retired by her employer due to old age. At the time
of retirement, she was 65 years old and employed with the
same employer for 8 years. Even if her employer has no BIR-
approved retirement plan, she was given a lump-sum amount
as retirement compensation. Is the retirement compensation
subject to income tax?
Answer 1: Yes, because the retirement plan is not BIR-
approved and Ganda did not serve her employer for at least
10 years.
Answer 2: No, because Ganda retired at her compulsory age
retirement.
a. Only answer 1 is correct.
b. Only answer 2 is correct.
c. Both answers are correct.
d. Both answers are incorrect.
40. Wilson was terminated from his work because of major
infraction of company policy. For humanitarian reason, he
was given a separation pay equivalent to 2 months
compensation. Is the separation pay subject to income tax?
Answer 1: Yes, because his termination was within his
control.
Answer 2: No, because his termination was beyond his
control.
a. Only answer 1 is correct.
b. Only answer 2 is correct.
c. Both answers are correct.
d. Both answers are incorrect.
41. Which of the following use of corporate vehicle is subject to
FBT as use by a corporate officer?
Aircraft Fleet of vehicles Car
a. No No No
b. No Yes Yes
c. Yes Yes Yes
d. Yes No No
42. In March 200A, Tonette, who is fond of jewelries, bought a
diamond ring for P750,000.00, a bracelet for P250,000.00, a
necklace for P500,000.00, and a brooch for P500,000.00.
Tonette derives income from the exercise of her profession as
a licensed CPA.
In October 200A, Tonette sold her diamond ring, bracelet,
and necklace for only P1.25 million incurring a loss of
P250,000.00. She used the P1.25 million to buy a solo
diamond ring in November 200A which she sold for P1.5
million in September 200B. Tonette had no other transaction
in jewelry in 200B.
Which among the following describes the tax implications
arising from the above transactions?
a. Tonette may deduct his 200A loss only from her 200A
professional income.
b. Tonette may carry-over and deduct her 200A loss only
from her 200B capital gain.
c. Tonette may carry over and deduct her 200A loss from
her 200B professional income as well as from her capital
gain.
d. Tonette may not deduct her 200A loss from both her
200B professional income and capital gain.
43. Anktryd, Inc., bought a parcel of land in 200A for P7 million as
part of its inventory of real properties. In 200B, it sold the
land for P12 million which was its zonal valuation. In the same
year, it incurred a loss of P6 million for selling another parcel
of land in its inventory. These were the only transactions it
had in its real estate business. Which of the following is the
applicable tax treatment?
a. Anktryd shall be subject to a tax of 6% of P12 million.
b. Anktryd could deduct its P6 million loss from its P5
million gain.
c. Anktryd's gain of P5 million shall be subject to the
holding period.
d. Anktryd's P6 million loss could not be deducted from its
P5 million gain.
44. Keyrand, Inc., a Philippine corporation, sold through the local
stock exchange 10,000 PLDT shares that it bought 2 years
ago. Keyrand sold the shares for P2 million and realized a net
gain of P200,000.00. How shall it pay tax on the transaction?
a. It shall declare a P2 million gross income in its income
tax return, deducting its cost of acquisition as an
expense.
b. It shall report the P200,000.00 in its corporate income
tax return adjusted by the holding period.
c. It shall pay 5% tax on the first P100,000.00 of the
P200,000.00 and 10% tax on the remaining P100,000.00.
d. It shall pay a tax of one-half of 1% of the P2 million gross
sales.
45. Statement 1: Depreciation expense related to the revaluation
increment of fixed asset is deductible.
Statement 2: Contribution to political parties registered with
COMELEC is deductible from the donor’s gross income.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.
46. Statement 1: Self-employed taxpayer is required to file his
quarterly income tax return.
Statement 2: The option to avail of optional standard or
itemized deduction could be opted for each quarter.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
 MIDTERM EXAMINATION
d. Both statements are not correct. calendar year 2011, the net income per books is P150,000,
after considering among others:
47. Alain Descartes, a French citizen permanently residing in the Non-taxable income (others) P 5,500
Philippines, received several items during the taxable year. Inter-corporate dividends 5,500
Which among the following is NOT subject to Philippine Net capital loss 2,500
income taxation? Bad debts written off 6,500
a. Consultancy fees received for designing a computer Non-deductible expenses (others) 12,000
program and installing the same in the Shanghai facility Contribution to a non-profit 12,000
of a Chinese firm. religious organizations
b. Interests from his deposits in a local bank of foreign Contribution to government’s 1,500
currency earned abroad converted to Philippine pesos. priority program
c. Dividends received from an American corporation which Quarterly income tax payments 65,000
derived 60% of its annual gross receipts from Philippine Provision for bad debts 8,000
sources for the past 7 years.
d. Gains derived from the sale of his condominium unit a. P66,240
located in The Fort, Taguig City to another resident alien. b. P62,100
c. P 1,240
48. Which of the following is not an essential of an acceptable d. None of the choices
accounting method?
a. There should be distinction between revenue and capital 53. The following information were taken from the records of a
expenditures. private educational institution for the fiscal year ended May
b. Expenses to restore property or prolong its useful life 31, 2011:
should be added to the property account or charged Miscellaneous fees P362,600
against depreciation. Tuition 2,843,100
c. In all cases in which production, purchase, or sale of Income from rents 60,000
Net income, school canteens 36,200
merchandise is an income producing factor, inventories
Net income, bookstore 24,800
at the beginning and at the end of the accounting period Dividends 15,000
should be considered. Interest on time deposit 45,000
d. The accounting method should adhere strictly to Payroll and administrative salary 1,425,420
generally accepted accounting principles. Other operating expenses 844,430
Depreciation, new six-room building 37,500
49. Lualhati Educational Colleges, Inc., a nonstock and nonprofit In the first month of the fiscal year, the school built a new
educational institution, decided to lease for commercial use a six-room building costing P750,000. The new building has a
1,500 sq. m. portion of its school. The school actually, useful life of 10 years.
directly, and exclusively used the rents for the maintenance
of its school buildings, including payment of janitorial How much is the income tax due from the school for the fiscal
services. Is the leased portion subject to real property tax? year ended May 31, 2011?
a. Yes, since Lualhati is a stock and for profit educational a. P305,805
institution. b. P203,870
b. No, since the school actually, directly, and exclusively c. P152,903
used the rents for educational purposes. d. P101,935
c. No, but it may be subject to income taxation on the
rents it receives. 54. Mario acquired 1,000 shares, par P100 per share of SM
d. Yes, since the leased portion is not actually, directly, and Corporation for P98,000 with the following market values the
exclusively used for educational purposes. last quarter of the year:
October November December
50. The total amount of price of the sale including the cash or Market values 98% 99% 100%
property received and including all notes of the buyer or
Mario sold the shares of stock through the stock market on
mortgages assumed by him.
December because of the ½ of 1% stock transaction tax while
a. Initial payment the capital gains tax is 5% if sold directly to the buyer. Is
b. Selling price Marisa’s decision would result to a tax saving? At what
c. Contract price amount?
d. Fair market price a. No tax savings because whether the sales be made
through the stock market or direct to the buyer, the
same amount of tax would be paid.
51. Mr. Abu, a Japanese engineer residing in Tokyo, Japan, was b. No tax savings because her decision resulted to a tax
contracted by a domestic corporation to assemble in the disadvantage amounting to P400.
Philippines an equipment it bought in Japan. He started to c. There is tax savings of P400.
work in Japan and spent 10 days there. The assembling job d. There is tax savings of P100.
was completed in the Philippines for another 20 days. He
55. Mr. Smith, a nonresident alien, who is engaged in business in
was paid P300,000 for his job. How much is the income from the Philippines, presented the following incomes and
Philippine source? expenses during the taxable year:
a. P 300,000 Philippines Australia
b. P200,000 Gross income P1,000,000 P4,000,000
c. P100,000 Operating expenses 400,000 2,200,000
d. None
In addition, Mr. Smith presented P200,000 operating
expenses which cannot properly be identified whether or not
52. Compute the net income tax still due from a domestic
incurred in the Philippines.
corporation engaged in merchandising business. For the
 MIDTERM EXAMINATION
How much is the amount of operating expenses for Philippine a. P200,000
income tax purposes? b. P150,000
a. P600,000 c. P100,000
b. P450,000 d. P 50,000
c. P440,000
d. P400,000 61. How much is the amount of income tax due of Mr. Hapon if
he is a Japanese citizen not engaged in business in the
56. Naly Lito, a resident Filipino sole proprietor, reported the Philippines with the following income within?
following sales and expenses during the taxable year:
Interest income P100,000
Sales P1,200,000
Royalty income – literature 700,000
Cost of sales with documentations 700,000
Dividends 200,000
Itemized deductions with no official receipts 200,000
a. P110,000
b. P150,000
Naly contemplates to avail of OSD because the itemized
c. P200,000
deductions cannot be supported by official receipts. How
d. P250,000
much is the net amount of deductible advantage
(disadvantage) if she avails of OSD?
62. Mr. C, a minimum wage earner, reported a net compensation
a. P480,000 advantage
income of P160,000 during the year.
b. P280,000 disadvantage
Salary for twelve months P108,000
c. P220,000 advantage
Overtime pay 26,000
d. P220,000 disadvantage
Hazard pay 2,000
13th month pay 9,000
57. X Corporation reported a financial net income of P850,000
Bonus and other benefits 25,000
after effecting the following items:
Total compensation income P170,000
Interest income, net of 20% final tax 80,000
Less: SSS contributions P3,600
Interest expense 133,000
Pag-ibig contributions 3,000
Donation to religious organization 97,000
Medicare contributions 2,400
Union dues contributions 1,000 10,000
For tax purposes, how much is the net effect (increase or
Net compensation income P160,000
decrease) of the correct tax treatment the above items to
arrive for the net taxable income of X Corporation?
How much is the income tax due of Mr. C?
a. P90,000 decrease
a. P22,500
b. P45,000 decrease
b. P12,500
c. P20,000 increase
c. P10,500
d. P 5,000 increase
d. P - 0 -
58. Fran Corporation has P100,000 collectibles from Oliva who
63. Aga is a professional actor, married having 4 qualified
was declared by court insolvent with the P120,000 assets and
dependent children. He received a professional fee
P200,000 liabilities of which 50% is an income tax liability.
amounting to P1,940,000, inclusive of 12% VAT in 201A but
net of creditable withholding tax. How much is his income tax
How much is the deductible bad debts expense of Fran
still due and payable if Aga opted to use OSD?
Corporation?
a. P 1,000
a. P100,000
b. P17,000
b. P 80,000
c. P33,000
c. P 40,000
d. P49,000
d. P 20,000
64. Rosanna Roses, a resident Filipina actress, earned P1,700,000
59. On January 1, 201A, Cab-Once Partnership borrowed
as a professional fee in the making of a movie during the
P1,000,000 from City Lending Inc. for 12% interest per annum
taxable year, net of related 15% creditable withholding tax. In
for a period of one year. The money was used to construct a
addition, she earned the following from here other
structure to manufacture strawberry wine. The building has
performances:
an estimated useful life of 10 years.
Gross receipts Income tax paid
You are hired as the accountant of the partnership. You Philippines P 500,000 P 50,000
learned that in taxation the interest expense can either be Japan 1,000,000 250,000
treated as deduction (expense) or treated as capital
expenditures for depreciation. Miss Roses is single with two qualified dependent children.
To avail of tax advantage and time value of money, which She asked your service to minimize the payment of her
method will you use and how much is the tax advantage in income tax. How much is the amount of income tax still due
the first year? and payable?
a. P199,063
a. Depreciate, because the tax payable is only P3,600. b. P172,849
b. Expense, because the tax reduction is P36,000. c. P 85,710
c. Depreciate, because the tax advantage is P12,000. d. P 82,151
d. Expense because the tax advantage is P32,400.
65. AAA Corporation has the following income and expenses for
60. Spouses Samson and Delilah showed the following data the years 2009 and 2010. During 2009, bad debts worth
during the taxable year:
P10,000 were written off and allowed as deductions by the
Samson Delilah
BIR. The whole amount, however, was recovered in 2010.
Compensation income P500,000
Allowance given to wife and 2009 Income P100,000
4 minor dependent children (400,000) P400,000 Less: Bad debts 10,000
Other expenses 40,000
How much is the total amount of personal exemption of Net income 50,000
Samson and Delilah?
2010 Income P120,000
 MIDTERM EXAMINATION
Less: expenses 70,000 70. In the preceding number, if Wendy’s is a nonresident foreign
Net income 50,000 corporation, how much is the amount of final taxes on the
passive income and the capital gains tax?
How much is the additional tax in 2010 as a consequence of a. P120,000
bad debt recovery? b. P215,000
a. P10,000 c. P300,000
b. P3,500 d. P360,000
c. P3,000
d. None of the choices 71. A domestic corporation provided the following information
for year 2012:
66. Escri Bano, a bank manager, won the local election as Mayor First Qtr. Second Qtr. Third Qtr. Fourth Qtr.
of Tacurong City with an unutilized campaign funds NCIT P200,000 P240,000 P500,000 P400,000
amounting to P200,000. He filed his annual income tax return MCIT 160,000 500,000 200,000 200,000
CWT* 40,000 60,000 80,000 70,000
during the year with the following information:
Taxable compensation income,
net of P50,000 WTW P300,000 *CWT = creditable withholding tax based on revenue.
Excess MCIT from prior year is P60,000. How much is the
Less: Basic personal exemption 50,000
Net taxable income P250,000 income tax payable for the year 2012?
Income tax due P 50,000
a. P 980,000
How much is the correct income tax due of Escri Bano? b. P1,020,000
a. P125,000 c. P1,030,000
b. P110,000 d. P1,060,000
c. P100,000
d. P 50,000 72. The following are provided by a closely-held domestic
corporation:
67. Mr. Panghi Si, a resident Chinoy with business in Divisoria, Gross income from business P10,000,000
Dividend from domestic corporation 20,000
reported the following income and expenses:
January February March April Interest on bank deposits 30,000
Gross income P90,000 P80,000 P75,000 P60,000 Capital gains on direct sale to buyer
Optg. expenses 40,000 40,000 45,000 30,000 of shares of domestic corporation 120,000
Net income/mo. P50,000 P40,000 P30,000 P30,000 Business expenses 6,000,000
Dividend declared and paid 1,000,000
How much is the amount of Mr. Si’s first quarter net taxable
How much is the improper accumulated earnings tax?
income and income tax due?
First Quarter a. P195,700
b. P195,800
Net taxable income Income tax due
a. P150,000 P25,000 c. P196,000
b. P120,000 P18,500 d. P196,340
c. P100,000 P14,500
d. P 90,000 P12,500 73. On its 5th year of operation, a domestic corporation reported
an operating loss of P400,000.00 after operating expenses of
68. Data from the records of Mr. V, a resident Filipino widower P2,000,000.00. Its income tax payable for the period is:
having four qualified dependent children, are as follows: a. P48,000
Net worth, December 31, 200A P325,000 b. P40,000
c. P32,000
Nontaxable income for 200B 2,000
Nondeductible expenses for 200B (excluding d. P - 0 -
donations and contributions) 150,000
Donations deductible in full 20,000 74. A proprietary private educational institution has presented
Donations subject to limit 50,000 the following data for the calendar year of 2012:
Net worth, December 31, 200B 375,000 Gross income from:
Reported net income subject to tax 200B 24,200 Related activities P10,000,000
Unrelated activities 14,000,000
Mr. V’s unreported taxable income for 200B would be Operating expenses:
Related activities 4,000,000
a. P49,000.
b. P48,800. Unrelated activities 6,000,000
Tax payments first 3 quarters 1,000,000
c. P47,000.
d. P25,800.
How much is the income tax payable?
69. Wendy’s Corporation has the following income within: a. P4,200,000
Interest income derived from depository b. P3,200,000
bank under expanded foreign currency c. P 440,000
deposit system (EFCDS) P200,000 d. P 400,000
Capital gain from sale of shares of stock
not traded-in the local stock exchange 400,000
Dividend from a San Miguel Corporation 600,000 NORM AL (SCH ED U LAR) TAX R A
(S e c. 2 4 ( A)

How much is the total amount of final taxes on the passive Not over P10,000
income and capital gains tax assuming that Wendy is a Over P10,000 but not over P30,000 P500
resident foreign corporation?
Over P30,000 but not over P70,000 P2,500
a. P75,000
b. P64,000 Over P70,000 but not over P140,000 P8,500
c. P50,000 Over P140,000 but not over P250,000 P22,50
d. P42,000 Over P250,000 but not over P500,000 P50,00

Over P500,000 P125,0

 MIDTERM EXAMINATION

75. The following data pertains to Air America, international

carrier doing business in the Philippines:
Gross receipts, sales of tickets in the
Philippines (Manila to Taipei) P8,000,000
Gross receipts, sales of tickets in Japan (Manila
to Taipei) 5,000,000
Gross receipts, sales of tickets in Japan (Tokyo
to Manila) 3,000,000
Gross receipts, sales of tickets in the
Philippines (Manila to Hongkong-passengers
were endorsed to another international airline
which airlifted them from Manila) 1,000,000
Gross receipts, sales of tickets in the
Philippines (Manila to Los Angeles-passengers
were transhipped in Tokyo to LA by another
airline) ; Manila to Tokyo- 5 hours; Tokyo to
LA-10 hours 4,500,000
Expenses, Philippines 4,000,000

How much is the Philippine income tax due and payable?

a. P5,250,000
b. P 537,500
c. P 387,500
d. P 287,500

END OF EXAMINATION