Taxation Income Mcq

INCOME TAXATION

1. Who among the following is a non-resident alien? (RPCPA) a. An alien who comes to the Philippines for a definite purpose which in its nature may be promptly accomplished. b. An alien who comes to the Philippines for a definite purpose which in tis nature would require an extended stay. c. An alien who has acquired residence in the Philippines. d. An alien who lives in the Philippines with no definite intention as to his stay. 2. Christopher, a staff auditor of the Sycip, Gorres, Velayo& Co. took and passed the examination for Certified Internal Auditor (CIA). The following year, he resigned from his job and left the Philippines on April 10, 2010 to work as an internal auditor in a big establishment in Melbourne, Australia. For income tax purposes, which of the following statements is correct with respect to Christopher’s classification? a. He shall be classified as nonresident citizen for the whole year of 2010. b. His classification as an nonresident citizen will start in 2011. c. He shall be classified as nonresident citizen for the year 2010 with respect to his income derived from sources without from April 10, 2010. d. He shall be classified as nonresident citizen for the year 2010 with respect to his income derived from sources without from April 11, 2010. 3. Who among the following individual taxpayer’s is taxable on income within and without? a. Alcazar, a native of General Santos, City, working as overseas contract worker in Iraq. b. Philander Rudman, naturalized Filipino citizen and married to a Filipina. He had been living in Olongapo City since 1970. c. Rodrigo de la Hoya, Spanish citizen, a resident of Madrid,Spain, spent a one (1) week vacation trip in Boracay. d. Dao Ming So, Taiwanese singer, held a 3-day concert in Manila. 4. Which of the following taxpayers whose personal exemption is subject to the law on reciprocity under the tax code? (RPCPA) a. Non-resident citizen with respect to his income derived from outside the Philippines. b. Non-resident alien who shall come to the Philippines and stay herein for an aggregate period of more than 180 days during any calendar year. c. Resident alien deriving income form a foreign country. d. Non-resident alien not engaged in trade or business in the Philippine whose country allows personal exemption to Filipinos who are not residing but are deriving income from said country. 5. The personal exemption of the non-resident alien engaged in trade or business in the Philippines is equal to that allowed by: (RPCPA) a. The income tax law of his country to a resident citizen of the Philippines not residing there; b. The income tax law of his country to a citizen of the Philippines not residing there or the amount provided by the NIRC to a citizen or resident, whichever is lower, c. The National Internal Revenue Code to a citizen or resident; d. The income tax law of his country allows to a citizen of the Philippines not residing there or the amount provided by the NIRC to a citizen or resident alien, whichever is higher.

6. The taxpayer is married non-resident alien engaged in business in the Philippines with two qualified dependent children. His country gives a non-resident Filipino with income therefrom a basic personal exemption. (If married) of P20,000 and additional exemption of P4,000. He is entitled to a personal exemption of (RPCPA) a. P 28,000 b. 26,000

c. P 24,000 d. 20,000

7. The following except one, may claim personal exemptions? (RPCPA) a. b. c. d.

Nonresident alien not engaged in trade or business in the Philippines. Nonresident alien engaged in trade or business in the Philippines Resident alien Citizen

8. An exemption provided by law to take care of personal living and family expenses of the taxpayers and the amount of which is determined according to the status of the taxpayers are? (RPCPA) a. b. c. d.

Optional standard deduction Personal exemption Additional exemption Special additional exemption

9. An exemption allowed to a taxpayer who has qualified legitimate, illegitimate, or legally adopted children (RPCAP) a. b. c. d.

Additional exemption Special additional personal exemption Optional standard deductions Personal exemption

10. A man has three wives under his tribal customs and practice. He is entitled to a personal exemption appertaining to (RPCPA) a. A single individual b. A married individual c. A married individual plus additional exemption for dependents pertaining to each of the 2 extra wives. d. A head of the family plus additional exemption for dependents pertaining to each of his three wives. 11. As a rule, who of the spouses is the proper claimant of the additional exemption with respect to any of the dependent children? a. b. c. d.

The husband if his income is higher than the income of the wife The spouse who has a higher income The husband; The wife

12. The wife can claim additional exemption if (RPCPA) a. The husband’s income is lower than her income. b. The husband is a nonresident citizen with income form within and without the Philippines. c. The husband is a pure business income earner. d. The husband has no income of his own.

13. The husband can waive his right to claim the additional exemption in favor of his wife it a. b. c. d.

He is a nonresident citizen whose income is purely without the Philippines. He has no income of his own He is compensation income earner in the Philippines His income is purely subject to final withholding tax.

14. Who among the following qualifies as dependent for purpose of additional exemption? a. Sister-in-law b. Stepmother

c. Granfather d. Illegitimate daughter

15. Nena, aged 70 years old, who lives with her unmarried son Mario, received P60,000 which was used for her support during the year. The sources of support were as follows: Social security benefits Mario Caroline, an unrelated friend Douglas, son of Nena Lalaine, Nena’s sister Total

P 24,000 20,000 4,000 5,000 7,000 60,000

Who can claim head-of-family status based on Nena’s dependency exemptions? a. Mario c. Lalaine b. Douglas d. None 16. Who of the following is not a qualified dependent for purposes of claiming additional exemptions? a. Illegitimate child b. Legally adopted child

c. Legitimate child d. Child by natural adoption

17. Mr. Maasikaso, single, the following dependents who are living with and entirely dependent upon him for chief support: Andrea, child will his ex-girlfirend. Barbara, legitimate child of his sister, legally adopted by Mr. Maasikaso Caridad, mother, 85 years old, widow-bedridden. Donata, godmother, 80 years old.

a. b. c. d.

MrMaasikaso can claim additional personal exemption on – Andrea only Andrea and Barbara Andrea, Barbara and Caridad Andrea, Barbara, Caridad and Donata

18. A native of Naga City, supporting his brother, 18 years old, unmarried not gainfully employed, studying Bachelor of Science in Accountancy at the University of Santo Thomas, is entitled to a basic personal exemption of – a. P 20,000 b. 25,000

c. P 50,000 d. 75,000

19. The additional personal exemption on every qualified dependent child is – a. P 8,000 c. P 25,000 b. 32,000 d. 50,000 20. Remy Martin, single supporting the following: I. Johnny Walker, illegitimate son, 6 years old, studying in the Universidad de Jeres, Cadiz, Spain living with Remy Martin’s diplomat brother in Andalucia, Spain.

II.

Torres, father, living with him. Remy Martin is giving 60% of the entire support needed; the other 40% is being furnished by his sister, Chivas Regal.

Remy Martin an claim a total exemption of – a. P 20,000 c. P 33,000 b. 75,000 d. 41,000 21. Taxpayers are husband and wife. The gross compensation income of the wife if P260,000 while the gross business income of the husband is P200,00. They have six (6) qualified dependent children but within the year one child died. Their total exemptions is (RPCPA) a. P 200,00 b. 96,000

c. P 64,000 d. None

Basic personal exemptions: Wife P 50,000 Husband 50,000 Additional exemptions (25,000 x 4) Total exemptions

P 100,000 100,000 200,000

22. Eliza’s husband died in April 2011 leaving seven (7) unmarried children living with and wholly dependent of Eliza for support. The ages of the children are as follows: Children A B C D E F G

Ages 24 22 19 10 8 6 3

Status Jobless Mentally retarded Studying in Manila Studying in their hometown Studying in their hometown Studying in their hometown Taken by the grandparents after the death of the father

For purposes of taxable year 2011, how much exemption would Eliza be entitled to? (RPCPA) a. P 150,000 b. 57,000

c. P 64,000 d. 73,000

23. In 2011, Padolino’s wife died of a car accident. His dependents are as follows: a. b. c. d. e. f. g.

Child, 22 years old, employed on July 12, 2011 Child, 21 years old on January 2, 2011 Child, 18 years old, married on January 31, 2011 Child, 17 years old, gainfully employed on October 1, 2011 Child, 15 afflicted with sore eyes on May 6, 2011 Child, 13 died of an accident in 2011 Brother, 28 paralytic

For taxable year 2011, Padolino can claim additional exemptions of – a. P 75,000 c. P 100,00 b. 125,000 d. 32,000 24. For taxable year 2012, Padolino can claim additional exemptions of a. P 8,000 c. P 25,000 b. 16,000 d. 100,000

25. Mdm. I, widow, earning an annual gross compensation income of P300,000 has the following dependent children in 2011. Aubrey Barbara Cristela Diana Eliza

-

baby, born on January 31; celebrated her 21st birthday last June 12; married on January 1; gainfully employed effective July 1 died of dengue fever on September 30;

Assuming Mdm. I has two employees, her taxable income in 2011 a. P 32,000 c. P 150,000 b. 63,000 d. 100,000 26. The taxable income of Mdm. I in 2012 is – a. P 120,000 b. 225,000

c. P 95,000 d. 87,000

27. Which of the following income derived from within the Philippines by a resident individual is not subject to the rates in Section 24(A) of the NIRC? (RPCPA) a. Salary received by a managing partner of a general professional partnership b. A passive income in the form of a prize won in a raffle amounting to P4,000 c. A gain from sale of a motor vehicle as another income of a taxpayer who is a compensation income earner. d. A gain on sale of a real property for private use of the family of the taxpayer. The salary of a managing partner of a general professional partnerships included in gross income. Hence, it is subject to the graduated rates of tax on income. Prizes amounting to P10,000 or less are subject to the rates in the tax table Gain on sale of motor vehicle of a compensation income earner is a capital gain which is also subject to the graduated rates in the tax table. A real property for privates use of the family of the taxpayer is a capital asset. Its sale or exchange is subject to 6% final tax. Therefore, any income derived from the sale is not subject to he graduated rates for income tax. 28. Which of the following income is subject to final tax received by an individual taxpayer? I. Share of a partner in the net income of a business partnership II. Cash dividend received by a stockholder from domestic corporation III. Winnings in lotto IV. Raffle prizes amounting to P6,000 a. I and II b. III and IV

c. I, II and IV d. I,II, III and IV

29. Which of the following is not a requisite for deductibility of health insurance? c. The total family income is not more than P250,000 d. The maximum amount of premium deductible during the year is P2,400 per family or P200 a month e. In the case of married individual, the spouse claiming the additional exemption shall entitled to claim the insurance premiums paid. f. The taxpayer must be a head of family 30. Statement 1: Health and/or hospitalization insurance premiums paid by an individual are deductible only if the taxpayer is a pure compensation income earner.

Statement 2: A taxpayer who has paid a monthly health insurance premiums of P400 for six months in a year can claim a total deductive amount of P2,400 a. True, False b. True, True

c. False, True d. False, False

31. Maliksi, single, supporting his 58 year old mother, is a business income earner. During the year, his net income was P15,000. He also paid a total premium of P3,000 to an insurance company for his health insurance. How much is his taxable income? a. P97,600 b. 97,000

c. P122,000 d. 122,600

32. All of the following except one, are taxable on income within only: a. Resident alien b. Nonresident citizen

c. Resident citizen d. Nonresident alien

33. In 2011 Rustom, Filipino, legally separated from is wife, Mina, left for the United States with his daughter, Robina, to permanently reside therein. In 2011 he earned P 2 million as income from his beauty parlor in that country. Which of the following statement is correct? a. For Philippine income tax purposes, Rustom may deduct from his gross income his personal exemption of P50,0000 or the amount allowed in that country, whichever is lower. b. For Philippine income tax purposes. Rustom’s gross income is subject to a creditable withholding tax of 10%. c. Rustom’s gross income of P2 million is not taxable in the Philippines d. For Philippine income tax purposes, he is no longer entitled to claim additional exemption on Robina because he is already classified as a nonresident alien engaged in business in foreign country. 34. Case 1: Pepe, a CPA, had signed a legally enforceable agreement with his wife, Pilar, that the earnings from the exercise of his profession would be shard equally between them for purposes of computing the income to be reported in their respective individual income tax return. Is the agreement valid? Case 2: Lorenzo advised his daughter, Lorena that rent income the dormitory owned by Lorenzo will accrue to the latter. Lorena collected the income and reported it on her own return. Were the actions taken by Lorenzo and Lorena valid? Case 1 a. Yes b. Yes c. No d. No

Case 2 No Yes Yes No

35. Which of the following statements is incorrect on winnings of resident citizen? a. b. c. d.

Taxable on income within and without May be entitled to claim basic personal exemption May be entitled to claim additional exemption Shall be taxable on all income derived from sources within the Philippines.

36. Which of the following statements is incorrect on winnings of a resident citizen? a. Lotto winnings in the United States of a Filipino residing in the Philippines is taxable in the Philippines

b. Lotto winnings sponsored by the Philippines Charity’s Sweepstakes Office is not taxable to a resident citizen. c. Winnings of brand new in raffle draw sponsored by a shoppings mall is taxable. d. Winnings in a raffle draw sponsored by a cigarette company is subject to tax based on the schedule or rates in the tax table if the amount involved does not exceed P10,000 37. The taxable income if Sharon is a resident citizen, single is – a. P 261,000 b. 334,000

c. P 291,000 d. 306,000

38. The taxable income if Sharon is a non-resident alien ETB, married with five (5) dependent children – a. P 243,000 b. 56,000

c. 74,000 d. None

39. The income tax due on Sharon assuming she is a nonresident alien NETB, single is – a. P 83,500 b. 63,500

c. P 18,500 d. 334,000

40. The income tax payable / overpayment of Elvis is – a. P 3,000 b. 10,200

c. P (5,500) d. 8,700

41. The taxable income of Madonna is – a. P 27,500 b. 37,500

c. P 11,600 d. None

42. The final tax on the passive income is – a. P 14,000 b. 7,000

c. None d. No answer

43. The optional standard deduction on individual is – a. b. c. d.

40% of taxable income 40% of business and / or professional including compensation income 40% of business and / or professional income 10% of business and / or professional excluding compensation income

44. Optional standard deduction is allowed to a. b. c. d.

Resident alien Nonresident alien engaged in trade or business Nonresident alien not engaged in trade or business Nonresident foreign corporation

45. The income tax payable by Rodil if he availed of the itemized deductions a. P 28, 125 b. 17, 125

c. P 44,900 d. 41,360

46. The income tax payable by Rodil if he availed of the optional standard deductions – a. P 4,500 b. 50,225

c. P 51,050 d. 51,650

47. The income tax payable by Carlo is – a. P 1,031.32 b. 18,277.72

c. P 363,16 d. 8,687.85

48. The income tax payable on Irene is – a. P 448.29 b. 1,431,45

c. P (983.19) d. None

49. Mrs. Evangelista owns a parcel of land worth P500,000 which she inherited from her father in 2011 when it was worth P300,000. Her father purchased in 2006 for P100,000. If Mrs. Evangelista transfers this parcel of land to her wholly owned corporation in exchange for shares of stocks of said corporation worth P450,000, Mrs. Evangelita’s taxable gain is (RPCPA) – a. Zero b. P 50,000

c. P 150,000 d. 350,000

50. Mr. Juan de la Cruz transferred his commercial land with a cost of P500,000 but with a fair market value of P750,000 to JDC Corporation in exchange of the stocks of the corporation with par alue of P1,000,000. AS a result of the transfer he became the major stockholder of the corporation.

a. b. c. d.

As a result o the transfer (RPCPA) The recognized gain is the difference between the fair market value of the shares of stocks and the cost of the land. The recognized gain is the difference between the par value of the stocks and the fair market value of the land. No recognized gain because the land was in exchange of purely stocks and Mr. de la Cruz became the majority stockholder. No recognized gain because the land was in exchange of stocks of the corporation.

51. Mr. Santiago purchased a life annuity for P100,00 which will pay him P10,000 a year. The life expectancy of Mr. Santiago is 12 years. Which of the following will Mr. Santiago be able to exclude from his gross income? (RPCPA) a. P100,000 b. 10,000

c. P 20,000 d. 120,000

52. If an individual performs services for a creditor who in consideration thereof cancels the debt. The cancellation of indebtedness may amount: (RPCPA) a. To a gift b.To a capital contribution

c. To a donation inter vivos d. To a payment of income

53. Mr. Anakin, an employee of Fuerte Corporation is receiving a monthly salary (net of 10% withholding tax) of P 18,00. Due to an outstanding accomplishment in July, 2011. Due to an outstanding accomplishment in July 2011, the corporation gave him 200 shares of stock of the corporation with a par value of P100 per share and a fair market value of P150. The fair value on the date of receipt is P152 per share. How much is the income of Mr. Anakin in 2011? a. P 50,000 c. 270,000 b. 270,400 d. 240,000 54. Carandang is indebted to Dacuycuy. Due to his inability to pay the debt, he was asked to clean the piggery of the latter for three months. Thereafter Dacucuy gave him P5,000 cash and condoned the debt amounting to P10,000.

How much income should be declared by Carandang? a. P 5,000 c. P 15,000 b. 10,000 d. None 55. Rewards given to person instrumental in the discovery of violations of the National Internal Revenue Code are subject to a. b. c. d.

Final tax of 10% on rewards collected. Final tax of 10% of P1,0000,000 Final tax of 10% of rewards collected or P1,000,000, whichever is higher. Final tax of 10% of rewards collected or P1,000,000, whichever is lower.

56. In 2010, Alonte received from his employer a promissory note with a face value of P50,00 for services rendered. The note will mature in 2011. However, it can be sold to a bank at a discount of 25%. The employer paid the promissory note in 2011. How much taxable income is to be declared by Alonte on the promissory note in 2010 and 2011? 2010 a. P50,000 b. 12,500

2011

2010 P 50,000 37,500

2011 c. P 37,500 d. None

P 12, 500 50,000

57. Using the same data in Number 56, except that 50% of the face value of the note is pay able in 2010 while the remaining 50% is pay able in 2011. How much income is taxable to Alonte in 2010, 2011 and in 2012? 2010 a. P 50,000 b. 37,500 c. 12,500

2011 None P 6,250 18,750

2012 None P 6,250 18,750

58. The taxable amount on the recovery of bad debt previously deducted is

a. b. c. d.

Case 1 P 40,000 40,000 30,000 30,000

Case 2 P 30,000 20,000 30,000 60,000

Case 3 P 40,000 40,000 55,000 25,000

Case 4 P 85,000 70,000 85,000 70,000

59. Which of the following statement is correct with respect to a leasehold contract? I. II. III.

Security deposits are reportable as income of the lessor in the year of receipt The depreciation on the improvement is to be computed by dividing the cost by the life of the asset or the remaining term of the lease, whichever is longer. Prepayment of rentals by the lessee are to be recorded by the lessor using cash method even if it is ordinarily using accrual method of accounting.

a. I only b. I and II

c. II and III d. III only

60. Which of the following statements is wrong on leasehold improvement? a. The amount of the improvement is not taxable to the lessor if he will pay the lessee whatever is the book value of the improvement at the expiration of the lease contract. b. The amounts du e on the lessor such as realty taxes shall be deductible expenses to the lessee if they are assumed by the latter. c. As a general rule, the lessor will pay lesser income tax if he avail of the spread-out method rather than take the outright method in reporting income on the improvement. d. A lessor shall consistently apply accrual method of accounting regardless of the prepayments in rents received from the lessee.

61. Assuming that on January 1, 2010. Jose paid P214,000 to Bryant covering the lease contract for two years, how much incomes is to be reported by Bryant in 2010? a. P 12,000 b. 13,500

c. P 24,000 d. 25,500

62. How much income is to be reported by Bryant in 2012 under the outright method? a. P 13,500 b. 1,500

c. P 1,013,500 d. 1,000,000

63. How much income is to be reported by Bryant in 2012 under the spread-out method? a. P13,500 b. 1,500

c. P 1,013,500 d. 88,500

64. How much is the deductible expense of the lessee in 2013? a. P 138,500 b. 63,500

c. P 125,000 d. 13,500

65. Assuming that due to the fault of the lessee, the lease contract was terminated on January 1, 2015, how much income is to be reported by the lessor in 2014? a. P 763,500 b. 750,000

c. P 88,500 d. 1,013,500

66. The rent income to be reported by Artemio in 2010 a. P 60,000 b. 123,000

c. P 120,000 d. 63,000

67. The rent income to be reported by Artemio in 2012 under outright method is – a. P 60,000 b. 63,000

c. P 1,860,00 d. 1,863.000

68. The income to be reported by Artemio in 2012 under spread-out method is – a. P 84, 429 b. 105,857

c. P 81,429 d. 21, 429

69. Which of the following statements is correct? a. Effective January 1, 2010, the land shall be exempt from real estate tax. b. Effective January 30, 2012, the land shall be exempt from real estate tax c. Effective January 1, 2013, the land and the building shall be exempt from real estate tax. d. Effective June 30, 2012 the land and the building shall be exempt from real estate tax. 70. The deductible expense of Lezzie Business College in 2013 – a. P 165,857 b. 162,857

c. P 114,429 d. 84,429

71. The income to be reported by Artemio in 2013 under spread-out method is – a. P 105,857 b. 102,857

c. P 114,429 d. 84,429

72. The income to be reported by Artemio in 2013 under spread-out method is – a. P 1,443,000 b. 1,485,857

c. P 1,440,000 d. 1,482,857

73. On January 1 ,2010, Atutubolesed a lot of Bengbeng with a building erected thereon for a period of 10 years. The lease contract provides that Bengbeng will pay the following: a. Monthly rental of P10,000 b. Fire insurance premium of P15,000 per year c. Real property tax of P5,000 a year The lessee will construct a concrete fence surrounding the lot of a cost of P1,2000,000 with a useful life of 20 years, shall belong to the lessor at the expiration of the lease. The fencing was finished on June 30, 2012. In 2012, Atutubo shall report as income from lease (spread-out method) an amount of a. P 75,000 c. P 140,000 b. 740,000 d. 190,000 74. In number 73 above, the lese can claim a deductible expense in 2012 of a. P215,000 b. 220,000

c. P 215,000 d. 190,000

75. Proceeds of insurance taken by a corporation on the life of an executive to indemnify it against loss in case of his death is (RPCPA) a. b. c. d.

Exempt from income tax Part of taxable income Subject to final tax Party exempt, partly taxable

76. Corco Corporation took tow life insurance policies on the life of its EVP, Mrs. Lopez, in one policy, the beneficiary is the corporation and the other, designates her husband as the revocable beneficiary. The insurance premium paid by Corco Corporation is (RPCPA) a. b. c. d.

Tax deducible insofar as the first policy is concerned. Tax deductible for both policies. Not tax deductible for both policies. First policy is not deductible, second policy is deductible

77. Which of the following is true? Proceeds of life insurance policy a. Is exempt from income tax upon the death of the insured if the beneficiary is not the estate, executor or the administrator. b. Is not subject to income tax if taken by a person other than the insured such as the employer. c. Are subject to income tax its entirely, if he insured outlives the policy regardless of the amount of premiums paid by the insured. d. Are exempt from income tax upon the death of the insured because other than the estate, executor or administrator is applicable only to estate tax and not to income tax. 78. Mrs. Lucena was insured under on endowment policy with a value of P500.00. Total premiums paid by her during the team of premium payments on the policy was P490,000 from which there was a return of premiums of P40,000. At the maturity of the policy, Mrs. Lucena received P500.00. The income of Mrs. Lucena under the policy is (RPCPA) a. Zero b. P 500,000

c. P 10,000 d. 50,000

79. Assuming that the policy matured when Sonia reached 50 years old and she received the entire P500,00 from the insurer, how much income should she report? a. P 500,000 b. 200,000

c. P 300,00 d. None

80. Assume that Sonia and died after 10 years of paying premium. How much income should be reported to the BIR? a. P500,00 b. 100,000

c. P 400,000 d. None

81. If Paulo dies on the 5th year, his beneficiary will report on income of a. P500,000 b. 150,000

c. P260,000 d. Exempt

82. Suppose Paulo dies on the 5th year and his beneficiary was offerd to receive the P150,000 in lump sum or to receive it at P20,000 a month for ten (10) months and the beneficiary chose the 2nd option, he will report an income of a. P 500,000 b. 150,000

c. P 50,000 d. Exempt

83. Suppose Paulo survived the policy and was able to receive P500,000 he will report an income of – a. P 500,000 b. 260,000

c. P 150,000 d. None

84. Andrew is the owner and beneficiary of a P500,000 policy on the life of his father. Andrew sells the policy to his brother Rolly for P150,000. Rolly subsequently pays premiums of P50,000. Upon his father’s death Rolly must. a. b. c. d.

Include P 500,000 in his gross income Exclude the entire proceeds in is gross income Include P300,000 in his gross income Include P350,000 in is gross income

85. Mr. Basilio insured his life with his estate as beneficiary. In 2011, after Mr. Basilio had paid P65,000 in premium, he assigned the policy to Mr. Jose Llamado for P60,000 and Mr. Llamado continued paying the premiums. Mr. Basilio died and Mr. Llamado collected the total proceeds of P200,000. Mr. Llamado, after the assignment and before Mr. Basilio’s death, paid total premiums of P90M000. As a result of the above transaction, Mr. Llamado (RPCPA) a. b. c. d.

May consider the process of P200,000 as exempt from tax. Derived a taxable income of P55,000 Derived a taxable income of P60,000 Answer not given.

86. Binatay Reyes won the international Billard Championship held in Madrid Spain. The tournament was sanctioned by a national sports association which is recognized by the Philippine Olympic Committee. He was awarded U.S. $60,000 by the sponsor of the tournament. He was also given P250,000 cash by San Miguel Corporation as prize or award. If the same year, he entered into a control with the same company to advertise their product for P1,5000,000

If the exchange rate of every U.S. $1 is P45. Binata Reyes should report an income of – a. P 4,750.000 b. 1,5000,000

c. P 1,750.000 d. 3,250.000

87. While crossing along the intersection of Legarda St. and Recto Avenue is Sampaloc, Manila, Miss Mina Malas was bumped by a passenger jeepney. As a consequences of the accident, she was hospitalized for 20 days. The driver and the operator of the passenger jeepney paid her a total amount of P135,000 for the following expenses that she incurred; Hospital bills Cost of medicines Moral damages for mental anguish and others

P 60,000 15,000 60,000

She also received P20,000 as settlement of a libel case that she filed against a television station which announced that she was pregnant at the time off the accident and that the fetus was aborted.

a. b.

The income to be reported by Mina is – P0 20,000

c. P 60,000 d. 155,000

88. Mr. Monte was injured in a vehicular accident in 2011. He incurred and paid medical expenses of P20,000 and legal fees of P10,000 during the year. In 2012, he received P70,000 as settlement from the insurance in the accident. From the above payments and transactions, the amount of taxable income of Mr. Monte in 2011 is (RPCPA) a. Zero b. P 40,000

c. P 70,000 d. 50,000

89. An accident attributed to the negligence of the drive of Superman Lines resulted in the death of Richard’s wife, physical injuries to Richard that prevented him form working for two (2) months and the total wreck of his brand new car which he had bought for P450,000. In an action for damages, the court awarded to Richard the following P40,000 - injuries to Richard consisting mainly in the loos of his left leg. 40,000 - two months salary of Richard 80,00 - for the death of his wife 100,000 - Moral damages for the physical suffering and mental anguish. 600,000 - for the loss of his car, the value of which had increased. Based on the foregoing Richard should report income of – a. P 190,000 c. P 830,00 b. 680,000 d. 240,000 90. Lenny was hit by a wayward bus while on her way home. She survived but had to pay P150,000 for her hospitalization. She was unable to work for six (6) months which meant the she did not receive her usual salary of P10,000 a month or a total of P60,000. She sued the bus company and was able to obtain a final judgment awarding her P150,000 as reimbursement for her hospitalization, P60,000 for the salaries she failed to receive while hospitalized, and P250,000 as moral damages for her pain and suffering. She was able to collect in full from the judgment. How much income did she realize when she collected from the judgment? a. P 460,000 b. 250,000

c. P 60,000 d. 400,000

91. Samsona was injured in a vehicular accident in 2010. She incurred and paid hospital expenses of P30,000 and legal fees of P15,000 during that year. In 2011, she recovered P40,000 as settlement from the insurance company which insured the car owned by Dimar, the other party involved in the accident. From the above payments and transactions, the amount of income taxable to Samsona is: a. P 40,000 in 2011 b. 5,000 in 2011

c. P 5,000 in 2010 d. None

92. Which of the following is a taxable incorrect? (RPCPA) a. b. c. d.

Income from qualified pension plan Compensation for personal injuries Moral damages Interest on moral damages

93. Mrs. Cruz and recently joined the MMC as sales, executive. She was advised to be retrenched because the company was losing heavily, but that she would be given a substantial separation pay. The general manager, however, suggested to Miss Cruz to file a letter of resignation from the company, instead of having been involuntarily separated as the latter would have implications of inefficiency on her part. Miss Cruz chose to resign from the company and received the sum of P100,000 as separation pay. The above amount is (RPCPA) a. b. c. d.

Exempt from income tax Taxable in full Non-deductible expense on the part of the company Partially taxable

94. Sharmaine, on official of Sampaguita Corporation asked for an earlier retirement because she was emigrating to Canada. She was paid P 1 million as a separation pay in recognition of her valuable services to corporation. Shane, another official of the same company was separated for occupying a redundant position. She was given P500,000 as separation pay. Sheila was separated due to her failing eyesight. She was given P250,000 as separation pay. Life of the three (3) were not qualified to retire under the BIR approved pension plan of the corporation. Q1 :Is the separation pay given to Sharmaine subject to income tax? Q2: How about the separation pay received by Shane? Q3 :How about the separation pay received by Sheila? a. b. c. d.

Yes to all questions Yes to 2nd question No to all questions No to 2nd and 3rd questions

95. During the year, Bata received a coconut land form his mother by way of an inter vivas donation. The land had a market value of P700,000 and earning an average annual income of P50,000. In the same year, his mother died. He inherited a passenger bust valued at P400,00 and resident house worth P2,000,000. The bus earned a total income of P30,000 in the hands of Bata.

As a consequences of his mother’s death, he received P400,000 form an insurance company as proceeds of an insurance policy taken by his mother who appointed him as the beneficiary. The total premium paid was P150,000. The income subject to tax is – a. P 3,500,000 b. 3,350,000

c. P 330,000 d. 80,000

96. After working for 30 years at Sto. Domingo Corporation, Miss Tilapia Nilotica retired from employment at the age of 60. She received P600,000 as retirement pay from the private retirement plan maintained by the employer. Other than her retirement benefits she also received her endowment insurance policy in the amount of P400,000 which she was paying for 20 years at an annual premium of P5,000. How much income must be reportedly by Miss Tilapia Nilotica? a. P 300,000 c. P 600,000 b. 400,000 d. None 97. Anton was hired as a staff auditor of SBB and Company in 1995. On December 2002 he transferred to Bayan and Associates. In 2004, he returned book to SBB and Company until his retirement in 2010 at the age of 55. Question 1: Are the retirement benefits taxable to Anton? Question 2: Suppose he was terminated from employment due to dishonestly, is the separation pay taxable to Anton? Question 3: Suppose he was terminated from employment due to the merger of the two audit firms. Will the separation pay be taxable to Anton? Q1 a. No b. No

Q2 Yes Yes

Q3 No Yes

Q1 a. Yes b. Yes

Q2 No No

Q3 No Yes

98. On October 1, 2011, Samantha inherited properties worth P3,000,000 from her mother. The properties are earning income of P90,000 a month. How much income is to be reported by Samantha in 2011? a. P 3,090,000 c. P 3,270.000 b. 3,000,000 d. 270,000 99. Villamayor, an employee of a cooperative was regularly receiving a monthly salary and allowance of P3,500 and P1,000 respectively. On June 1, 2011, he was retrenched by the cooperative paying him a separation pay of P125,000. He decided to use this money in buying a trimobile. For a six (6) month period, he earned a net income of P24,000. How much income should Villamayor declare in 2011 for income tax purpose? a. P 48,750 b. 46,500

c. P 173,750 d. 171,000

100. Raquel Montero was retired by her employer – corporation in 2011 and paid P2,000,000 as a retirement gratuity without any deduction of withholding tax. The corporation became bankrupt in 2010. Can the BIR subject the P2,000,000 retirement gratuity to income tax? (RPCPA) 1st Answer: No, if the retirement gratuity was paid based on a reasonable pension plan where Montero was 60 years old and has several the corporation for 9 years. 2nd Answer: Yes, if Montero was forced by retrenchment.

the corporation to resign due to

a. Both answers are wrong b.Both answers are correct c. First answer is correct, the second is wrong d. First answer is wrong, the second is correct. 101. Which of the following statements is wrong about fringe benefit? a. The fringe benefit tax does not apply to rank-and-file employees b. The rule on de minimis benefit does not apply to rank-and-file employees. c. The monetary value received by an official or employee is presumed to be net of the fringed benefit tax. d. If the recipient of a fringe benefit is a non-resident alien not engaged in trade or business, the monetary value shall be divided by 75% inorder to arrive at the grossed-monetary value. 102. Which of the ceilings on the following de minimis benefits is correct? Rice Subsidy a. P 1, 200 b. 1,000 c. 1,500 d. 1,500

Uniform Allowance P 3,000 4,000 3,500 4,000

103. 1st Semester: Laundry allowance not exceeding P300 per month is not an exempt de minimis benefit if given to rank-and-file employees. 2nd Semester: Rice subsidy of P1,500 per month is an exempt de minimis benefit regardless of whether the recipient employee is occupying a managerial position or not. a. Both statements are wrong b.Both statements are correct c. The first statement is correct, while the second statement is wrong d. The first statements is wrong, while the second statement is correct 104. After working for 30 years and due to old age. Rufino retired from his employment on December 31, 2011 as a rank-and-file employee to Tumagay Corporation. As a consequences of is retirement, he received the following from is employer. Salary for 2011 Christmas gift Anniversary bonus Loyalty award Retirement pay

P 252,500 25,000 2,500 10,000 750,000

Based on the above data, the amount subject to tax of Rufino is – a. P 250,000 c. P 252,500 b. 257,500 d. 1,037,500 105. The portion of compensation which is excluded from the gross compensation income if Mulry is a rank-and-file employee is – a. P 5,100 b. 34,100

c. P 29,000 d. None

106. The gross compensation income of Mulry in 2011 is – a. P 144,000 b. 150,000

c. P 109,900 d. 138,900

107. Which of the following a compensation paymentsto a minimum wage earner is subject to income tax? a. Holiday pay b. Overtime pay

c. Night shift differential pay d. None of the above

108. Three taxpayers have the following data:

2009 basic pay Monthly basic pay Holiday pay Overtime pay Hazard pay Night shift differential pay Total pay for the month

Alcanzo P 99,048 8,254 435 1,256 9,945

Barrientos Corporal P 101,172 P 84,368 8,431 10,546 1,459 2,543 1,000 1,686 11,576 14,089

Who of the above taxpayers is/are exempt from income tax? a. Alcanzo only b.Alcanzo and Barrientos c. Alcanzo, Barrietnos and Corporal d.Barrientos and Corporal 109. For purpose of income taxation which f the following is not considered as a corporation? a. General professional partnership b. Business partnership c. Unregistered partnership d. Joint stock companies 110. Which of the following businesses is not taxable as a corporation? a. Andrea, Barbara and Criselda contributed P500,00 each and opened up a department store in the downtown. They agreed that whatever net profit is earned will be distributed equally to them. They did not bother to register the business with the Securities and Exchange Commission. b. Gigi and Jayjay, tow senior staff auditors of a big accounting and auditing firm, resigned from their job and organized a new firm which they named as Gigi. Jayjay and Company. CPAS. c. Lovinia, Dorina, Rosa Mia and Capical formed a business organization with the following agreed features. (1) They are deprived of their general agency to act on behalf of their ventures (2) The power of management are vested in the Board of Trustees (3) The ownership is represented in transferable certificates (4) The business continues for its fixed term not with standing the death or disability of one of them; and (5) The liability of the partnership is not limited to their contributions. d. A group of live entrepreneurs had organized, filed and registered the articles of incorporation of Cojangkuha Corporation. It has an authorized capital stock of P10 million divied in 100,00 shares each share having a par value of P100 111. Which of the following is subject to income tax? a. SSS and GSIS b. Philippine Health Insurance Corporation (PHIC) c. Local Water Districts d. Philippine Amusement and Gaming Corporation (PAGCOR)

112. “Taxable net income received during each year from all sources” is the tax base for income tax purposes of this class of taxpayers (RPCPA) a. Domestic corporations b. Resident corporations c. Resident foreign corporations engaged in trade or business in the Philippines d. Resident foreign corporations not engaged in trade or business in the Philippines. 113. One of the following is taxed on gross income a. Domestic corporation b. Resident foreign corporation c. Non-profit cemetery d. Nonresident foreign corporation 114. Equipment’s Corporation, a domestic corporation has the following records of income and expenses in 2011. Gross income, net of 1% withholding tax P 1,435.500 Expenses 756.00 Rent income, net of 5% withholding tax 136,800 Expenses on rent 34,600 Dividend from domestic corporation 25,000 Royalty 80,000 Interest from bank, deposit with PNB, gross of tax 15,000 The income tax payable by Equipment’s Corporation is – a. P 214.020 b. 219,320

c. P 803,400 d. 259,490

115. Based on the data in Number 114 above, the total final taxes payable on Equipments Corporation is – a. P 19,000 b. 21,500

c. P 33,250 d. 3,000

116. Alliance Corporation, a corporation engaged in business in the Philippines and abroad, has the following data in 2011; Gross income, Philippines Expenses, Philippines Gross income, U.S.A. Expenses, U.S.A. Interest on bank deposit

a. b. c. d.

The income tax due if the corporation is – Resident Domestic foreign P 116,800 P 72,000 127,750 78,750 312,000 515,850 109,500 67,500

P 975,000 750,000 770,000 630,000 25,000

Nonresident foreign P 320,000 350,000 116,800 300,000

117. Which of the following statements is wrong on corporation? a. Domestic corporation are taxable in the Philippines on income derived from Japan and Philippines sources. b. Resident foreign corporation are taxable in the Philippines on income earned in the United States.

c. Nonresident foreign corporation are taxable in the Philippines on income derived form sources in the Philippines only d. Domestic corporation are taxable in the Philippines on income earned from business operation in the United States. 118. Tralala Corporation, a domestic corporation has the following record of income and expenses during the year. Gross income Expenses Dividend from a resident foreign corporation Royalties, Philippines Interest on time deposit with Metrobank Interest on money market placement

P 1,540.000 654,000 95,000 230,000 18,000 25,000

The taxable income on Tralal Corporation is – a. P 886,000 c. P 641,000 b. 1,156,000 d. 616,000 119. The total final withholding taxes on Tralala Corporation is – a. P 51,475 b. 2,600

c. P 103,120 d. 148,100

120. The income tax payable at the end of first quarter is – a. P 40,800 b. 36,720

c. P 28,300 d. 21,500

121. The income tax payable at the end of the second quarter is – a. P 26,000 b. 28,320

c. P 31,800 d. 75,600

122. The income tax payable at the end of the third quarter is – a. P 52,000 b. 62,400

c. P 12,640 d. None

123. The income tax payable/refund at the end of the year is – a. P 25,090 b. 62,750

c. P 75,900 d. 68,610

124. ABC Company, a domestic corporation has the following data:

a. b. c. d.

Income tax for 2010 Less: Tax credits Excess tax credits

P 119,000 125,000 15,000

2011 Income net of 1% withholding tax Deductions

1st Quarter P 495,000 460,000

For the 1st quarter of 2011, the corporation will report: (RPCPA) Excess tax credit of P6,000 Tax payable of P7,000 Excess tax credit of P8,000 Tax payable of P2,000

125. A domestic corporation has the following data: Excess tax credits from 2010 For the year 2011: Income net of 1% withholding tax Deductions

P 15,000 1 Quarter P 45,000 46,000 st

2nd Quarter P 792,000 700,000

How much is the income tax still due and payable in the second quarter? (RPCAPA) a. P 21,000 b. 14,000

c. P 10,400 d. 29,440

126. If the gross income from unrelated activity exceeds 505 of the total gross income derived by any private educational institution, the rate shall be 30% based on the entire taxable income. This principle is known as a. constructive receipt c. Tax benefit rule

c. end result doctrine d. predominance test

127. In 2011, ARTS University (ARUY), a proprietary educational institution registered with the Securities and Exchange Commission (SEC) and the Commission on Higher Education (CHED), spend P15,000,000 for the construction of a new building. For income tax purposes, this amount maybe: a. Claimed entirely as deduction from its 2009 gross income. b.Classified as an asset or expensed outright, at the option of the government. c. Classified as an asset or expensed outright, at the option of the taxpayer d. Classified as an asset an claim an annual depreciation over the life of the building. 128. Assuming the cost of construction is treated as an expense. The income tax payable by the school for the year ended June 30, 2011 is a. P 343,000 b. 147,000

c. P 576,000 d. 160,000

129. The income tax payable if the cost of building construction is capitalized: a. P346,000 b. 147,000

c. P1,203,200 d. 345,667

130. In 2011, Prosperidad Corporation a domestic corporation had a rest income of P2,000,000. It paid a corporate tax of 30% leaving a distributable income of P1,4000,000. If a dividend is declared by the corporation and received by the following stockholders, which of the following statements is false? a. Nonresident aliens engaged n trade or business are liable to pay 300% dividend tax b. Nonresident aliens not engaged in trade or business is liable to pay 25% dividend tax. c. Resident citizens are liable to pay 10% dividend tax. d. Resident foreign corporations are exempt from the payment of dividend tax. 131. Which of the following statements is true? Dividends received by a a. Domestic corporation from a resident foreign corporation are subject to final withholding tax b. Resident foreign corporation from another resident foreign corporation are subject to scheduler income tax in the Philippines c. Non-resident foreign corporation from a domestic corporation maybe subject to a tax sparing credit

d. Domestic corporation from another domestic corporation are subject to final withholding tax. 132. Dividends from a domestic corporation and/or share in the net income of a taxable partnership received by a citizen during the year 2011 is subject to a final tax of (RPCPA) a. Zero b. 30%

c. 20% d. 10%

133. The TY Corporation is an international carrier doing business in the Philippines. Its taxable base for income tax purposes is (RPCPA) – a. Gross Philippine Billings b.Gross Philippine Billings minus deductible expenses c. Regular rates of 32% of its net taxable income d. Allocation of income from sources within and without the Philippines, as well as expenses. 134. A resident international carrier has the following data for the current year: Gross income of P700,00 and expenses P200,000 from the Philippines. Gross income of P500,00 and expenses of P10,000 from Hongkong. How much is the tax payable of the corporation? (RPCPA) a. P 288,000 b. 17,500

c. P160,000 d. 30,000

135. One of the following is exempt from income tax a. Proprietary educational institutions b. Private cemeteries c. Government educational institutions d. Mutual savings bank 136. On February 5, 2011, Zurich Corporation declares 20% stock dividend and issued shares of stocks amounting to P100,000. On March 20, 2011 the corporation redeemed the stock dividend by virtue of which the stockholders surrendered their stock certificates in return for the cash paid to them by Zurich Corporation in the amount of P1000,000. a. The stock dividends declared are taxable because generally stock dividends are subject to income tax. b. The dividends are taxable to the stockholders because they are actually property dividends. c. The redemption of the stock dividend is essentially equivalent to the distribution of a taxable dividend. Hence, the amount to distributed in redemption shall be considered as taxable income. d. The distribution and the redemption of the stocks are not taxable because stock dividends are exempt from income tax. 137. If a corporation distributes its assets to its stockholders upon dissolution this kind of corporate distribution will result in (RPCPA) a. Stock dividends b. Property dividends

c. cash dividends d. liquidating dividends

138. If a corporation to which the stockholders is indebted forgives the debt, the transaction has the effect of a payment of what kind of dividend? (RPCPA) a. Stock dividend b. Cash dividend

c. liquidating dividend d. indirect dividend

139. The minimum corporate income tax (MCIT) is based on – a. 2% of gross income b. 10% of gross income

c. 5% of gross income d. 15% of gross income

140. The following statements relate to the rules on minimum corporate income tax. Which of them is false? a. It does not apply to nonresident foreign corporation b. If the corporation has commenced with its business operation in 2007, it shall be covered by the rule effective 2011. c. It shall be imposed whenever the operation of the corporation ahs resulted to a zero or negative taxable income. d. The imposable rate is 2% of taxable income. 141. The minimum corporate tax (MCIT) is imposed on – a. Proprietary educational corporation taxable at 10% of gross income b. Depository banks under the expanded foreign currency deposit system. c. Business partnerships d. Offshore banking units subject to final tax of 10% 142. Which of the following corporation is subject to the minimum corporate income tax? a. Proprietary educational institutions subject to tax at 10% of their taxable income. b. Non-profit hospitals subject to tax at 10% of their taxable income. c. Domestic airline companies operating within the Philippines only d. Depository banks under the expanded foreign currency deposit system 143. The imposition of minimum corporate income tax shall not be suspended whenever the corporation suffers losses due to a. Prolonged labor dispute b. Force majeure

c. legitimate business reverses d. mismanagement

144. A corporation which was registered with the Bureau of Internal Revenue in May, 2007 shall be covered by MCIT in a. 2010 b. 2011

c. 2013 d. 2014

145. Watchout Corporation which commenced business operations ion 2000 has a gross income of P632,000 and allowable deductions of P610,000 in 2011. Its income tax payable during the year is – a. P 7,700 b. 7,040

c. P 6,660 d. 12,640

146. Maikli Corporation has the following data: 2011 2012 Sales P 1,700,000 Cost of sales 1,050.00 Operating expenses 615,000 The income tax payable in 2011 is – a. P 13,000 c. P 35,000 b. 12, 250 d. 10,500

P 2,3000.00 1,425.000 480,000

147. In number 146, the income tax payable by Makati Corporation in 2012 is – a. P 117,750 b. 17,500

c. P 116,000 d. 137,500

148. In number 146 above, the journal entry in 201 to record excess MCIT is – a. Deferred charges – MCIT (13,000 – 10,500) Income tax payable b. Deferred charges – MCIT Income tax payable c. Provision for income tax Income tax d. Income tax payable Cash

P 2,500 P 2,500 13,000 13,000 11,200 11,200 13,000 13,000

149. In number 146 above, the accounting entry in 2012 to record the carry forward of excess MCIT normal income tax liability in 2011 is – a. Deferred charges – MCIT Income tax payable b. Provision for income tax Income tax payable c. Income tax payable Deferred charges – MCIT d. Retained earnings Deferred charges – MCIT

P 1,800 P 1,800 124,600 124,600 2,500 2,500 1,800 1,800

150. Statement 1: If the quarterly income tax is based on MCIT, the excess MCIT from the previous taxable year/s shall not be allowed to be credited. Statement 2: Expanded withholding tax, quarterly corporate income tax payments under the normal income tax, and the MCIT paid in the previous taxable quarters are allowed to be applied against the quarterly MCIT due. a. False, False b. False, True

c. True, False d. True, True

151. Agency Corporation has the following data during the year 1st Quarter Normal income tax P 10,000 Minimum corporate income tax 8,000 Taxes withheld during the quarter 2,000 Excess MCIT prior year 3,000 Excess w/ Tax prior year 1,000

2nd Quarter P 12,000 25,000 3,000

The income tax payable by Agency Corporation for the 1st quarter is – a. P 7,000 c. 3,000 b. 4,000 d. 2,000 152. If number 151, the income tax payable for the 2nd quarter is – a. P 15,000 b. 20,000

c. 27,000 d. 23,000

153. Meldy Corporation had the following items of income and expenses during the year. Gross receipts Cost of services Dividends from a domestic company General and administrative expenses

P 1,000.000 850,000 35,000 120,000

The income tax due on Meldy Corporation is – a. P 10,500 c. P 9,000 b. 3,000 d. 30,000 154. Joyce Corporation, a domestic corporation organized in 2006 has the following records of computation of tis income tax during the three (3) consecutive taxable years: 2009 Sales P3,000,000 Less: Cost of sales (1,800,000) Add: Net capital gain 80,000 Gross income 1,280,000 Less: Deductions 800,000 Taxable income 480,000 Rate of tax 30% Normal income tax 144,000 MCIT: 2009 – None 2010 (,150,00 x 2% 2011 (2,060,000 x 2%) Tax payable 144,000

2010 P 3,6000,000 (2,450,000) 1,150,000 925,000 225,000 30% 37,500

2011 P 4,3000,00 (2,250,000) 10,000 2,060,000 1,945,000 115,000 30% 34,500

23,000 41,200 41,200

67,500

Based on the above data, which of the following statements is false? a. The MCIT shall not be applied on Joyce Corporation until 2009. It shall only be applied effective in 2010. b. The excess MCIT in 2011 can e carried to the succeeding year even if the corporation suffers a loss in 2012. c. The term “gross income” includes other incomes. d. The excess MCIT of 6,700 in 2011 can be carried over until 2012 only 155. Irene Corporation, a domestic corporation has the following data:

Gross income Taxable income

2010 P 3,5000,00 125,000

2011 P 2,400,00 500,000

The income tax due on the Irene Corporation for 2010 is: a. P 43,750 c. P 26,250 b. 70,000 d. 40,000 156. The income tax payable by Irene Corporation for 2011 is: a. P 150,000 b. 48,000

c. P148,750 d. 124,750

157. A penalty and a form of a deterrent to the avoidance of tax upon shareholders who are supposed to pay dividends tax on the earnings distributed to them by the stockholders. a. Minimum corporate income tax b. Fringe benefit tax c. Improperly accumulated earnings tax d. Gross income tax

158. Improperly accumulated earnings tax is – a. 10% of taxable income b. 10% of net income c. 10% of improperly accumulated taxable income d. 10% of gross income 159. Which of the following is subject to improperly accumulated earnings tax? a. Insurance companies b. Business partnership

c. Banks d. Closely-held companies

160. Which of the following corporation is subject to the improperly accumulated earnings tax? a. General professional partnerships b. Non-taxable joint ventures c. Insurance companies d. Proprietary educational institutions 161. All of the following except one, are additions to taxable income tax purposes of computing improperly accumulated taxable income – a. Income subject to final taxes. b. Reserved for reasonable needs of the business c. Income excluded from gross income d. NOLCO deductive in computing taxable income 162. The income tax payable in 2011 is – a. P 234,000 b. 265,600

c. P275,500 d. 249,000

163. The improperly accumulated earnings tax is – a. P 64,415 b. 34,765

c. P 36,425 d. 32,275

164. The income tax payable in 201 is – a. P 81,800 b. 93.000

c. P 301.00 d. 70,000

165. How much is the improperly accumulated earnings tax in 2011? a. P 81,500 b. 93,800

c. P 91,500 d. None

166. Corporation can claim optional standard deduction in an amount of exceeding a. 10% of gross income b. 10% of gross sales or gross receipts, as the case maybe c. 40% of gross income d. 40% of gross income or gross receipts, as the case maybe 167. Ann Corporation has the following data during the year Gross Sales P 1,540,000 Cost of Sales 645,000 Expenses 460,460

If Ann Corporation availed of the optional standard deduction, the taxable income shall be – a. P 537,000 c. P 741,000 b. 434,540 d. 279,000 168. When Dina Mathay died, she left real properties to her husband and three (3) small children. The husband administered the property, the rental income of which he accumulated and later used in buying a passenger bus. Are the income of the inherited properties and the bus subject to tax? Inherited Bus a. Yes Yes b. Yes No c. No Yes d. No No 169. Andok and Baliwag contributed money and purchased five (5); hectares of land in 2010. In the same year, they sold the land of a higher price. In 2011, they bought a bigger parcel and sold it after three (3) months at double the price. They paid the corresponding capital gain taxes. Question 1: Have they formed an unregistered partnership subject to tax? Question 2: Are their respective shares in the income taxable to them? Question 1 Question 2 a. Yes Yes b. No Yes c. Yes No d. No No 170. When their parents died. Cherry and Gil inherited five (5) hectares of land in Antipolo City. They decided to invest capital and developed the land into a subdivision which they named as Cherry-Gil Subdivision with small being sold either on installment in cash basis Question 1: Is partnership created by Cherry and Gil? Question 2: Are they subject to final tax on their respective share in the income? Question 1 a. Yes b. No c. Yes d. No

Question 2 No Yes Yes No

Question 2: Are they subject to final tax on their respective share in the income? Question 1 a. Yes b. No c. Yes d.No

Question 2 No Yes Yes No

171. 1st Q: Is a co-ownership taxable? No, because the activities of the co-owners are limited to the preservation of the properly and the collection of income therefrom. 2nd Q: Is the share of a co-owner in the net income of a co-ownership taxable? Yes, because each co-owner is taxed individually on his distributive share in the income of he co-ownership. (RPCPA) a. Answers to both questions are correct b. Answer to Question 1 is wrong, answer to Question 2 is correct c. Answer to Question 1 is correct, answer to Question 2 is wrong d.Answer to both questions are wrong.

172. The members of this form of business organization shall be liable for income tax only on their individual capacity, and their share in the profits, whether distributed or otherwise, shall be returned for taxation. This applies to (RPCPA) – a. Duly registered general co-partnership b. Unregistered general co-partnership c. General professional partnership d. Joint-stock companies 173. The share of partner in the profits of a general professional partnership is regarded as received by him an thus taxable although not yet distributed. This principle is known as a. Advance reporting of income b. Actual receipt of income c. Accrual method of accounting d. Constructive receipt of income 174. Under the NIRC, income is received not only when it is actually or physical transferred to a person but even when it is merely constructively received by hm. An example of income constructive received is (RPCPA) a. Rental payments refused by the lessor, when the lessee tendered payment and the latte made a judicial deposit of the rental due. b.Interest coupons not yet due and payable c. Interest on savings deposit not yet credited to the account to the depositor d. Advances deposit made by the lessee. 175. Which of the following is considered or construed as an example of constructive receipt? (RPCPA) a. Retirement benefits, pensions, gratuities b. Fees paid to a public official c. Interest coupons that have method and are payable but have not been cashed d. Deposits for rentals to answer for damages restricted as to use 176. The income to payable by Bimbam and Company – a. P 218,750 b. 187,500

c. P 165,000 d. 192,500

177. The final taxes on the respective share of Bim and Bam in the partnership income – Bim Bam a. P 25,240.00 P 21,060.00 b. 31,157.50 25,495.50 c. 24,227.50 19,822.50 d. 30,250.00 55,045.00 178. The income tax payable by he partnership is – a. P 72,600 b. None

c. P 44,550 d. 45,900

179. The taxable income of Ping and Pong is – a. P 69,250 and P 0, respectively b. 114,250 and 127,750, respectively c. 101,250 and 33,750, respectively d. 96,250 and 68,750, respectively

180. The income tax payable by Panday is – a. P 20,500 b. 18,500

c. P 11,500 d. 59,000

181. The income tax payable by Pandak is – a. P 12,500 b. 48,000

c. P 16,500 d. 24,000

182. The total final taxed due on Panday is – a. P 3,000 b. 4,000

c. P 7,000 d. 22,000

183. The total final taxes due on Pandak is – a. P 17,000 b. 14,600

c. P 22,200 d. 15,200

184. The property, rights and obligations of a person which are not extinguished by his death and also those with have accrued thereto since the opening of the succession – a. Estate b. Legacy

c. Trust d. Will

185. A heir who inherits personal property by will is called a. Legatee b. Devisee

c. trustor d. beneficiary

186. An heir who inherits real property by will is called a. Legatee b. Devisee

c. trustor d. beneficiary

187. Tinong died on Janaury 1, 2011. He left a gross estate with a cost of P4,000,000 but valued at P3,500,000 under an administrator. During the year, the gross income derived from the business of the estate was P400,000 while the relate expenses amounted to P150,000 beneficiaries Felipe and Khadafi were given P100,000 each. The income tax due on the estate of Tinong is – a. P 30,000 c. P 5,500 b. 2,500 d. 50,000 188. An arrangement under which title to property is passed to another for investment, with the income and ultimately the principal to be distributed in accordance with the direction of the creator is – a. Will b. A trust

c. an inheritance d. pacto de retro

189. Which of the following is not subject to tax? a. Estates under judicial settlement. b. Irrevocable trust c. Unregistered partnerships d. Revocable trust

190. The consolidated taxable income of trusts is – a. P 143,000 b. 23,250

c. P 175,000 d. 300,000

191. The income taxes payable by trustee Caipas and Trustee Judas are Caipas a. P 24,375 b. 24,375 c. 26,000 d. 65,000

Judas P 24,375 40,625 39,000 23,250

192. The term “Capital assets” includes (RPCPA) a. Stock in trade or property included in the taxpayer’s inventory. b. Real property not used in the trade or business of taxpayer c. Property primarily for sale to customers in the ordinary course of trade or business d. Property used in the trade or business of the taxpayer and subject to depreciation. 193. Which of the following real properties is classified as a capital asset? a. Real property initially acquired by a taxpayer engaged in real estate business but subsequently abandoned or become idle. b.Real property transferred through succession or donation to the heir or donee who is not engaged in the estate business with respect to the real properly inherited or donated and who does not subsequently use such property in trade or business. c. Real properties of the real estate lessor, whether land and/or improvements, which are for lease or being offered for lease, or otherwise for use or being used in the trade or business. d. Real properties acquired in the course of trade of business by a taxpayer habitually engaged in the sale of real estate. 194. Under Section 39 (b) of the Tax Code, how much small be taken into account in computing net income, if a gain is realized by an individual taxpayer from the sale or exchange of capital assets (other than real properties and shares of stocks) held for more than 12 months? (RPCPA) a. 50% of the nel capital gain b.5% of the capital assets sold c. P50,000 d.5,000 195. Lots being rented when subsequently sold are classified as (RPCPA) a. Capital assets b. Liquid assets

c. ordinary assets d. fixed assets

196. A feature of ordinary gains are distinguished from capital gains (RPCPA) a. Gain form sale of assets not stock in trade b. May or may not be taxable in full c. Source are capital assets d. Not holding period 197. Which of the following taxpayers is allowed to observe the “no holding period and no carry over of net capital loss” a. Individual b. Estates

c. Corporation d. Trusts

198. Which of the following statements is true? a. The sale by a corporation of its office building shall not result to a capital gain even if it derived a gain on P240,000 on the sale. b. A corporation with a net capital loss of (50,-000 and a net income of P40,000 in 2011 can carry over only a maximum amount of P40,000 I n2012. c. A corporation which sold for P120,000 in 2011 an equipment which it acquired in 2008 to P180,000 shall report only a capital gain of P30,000 in 2011. d. A corporation which sold for P120,000 in 2011 an equipment which it acquired in 2008 for P180,000 shall report only a capital gain of P30,000 in 2011.

199. Rules on capital gains and looses of corporation except (RPCPA) a. Capital gains and losses are recognized to the extent of 100% regardless of he holding period. b.The net capital loss carry over is not applicable c. Capital losses are deductible only to the extent of capital gains d. There is a final tax of 5% on real property sold 200. Statement 1: Capital looses are deductible only from ordinary gains Statement 2: Corporation are not allowed to observe the holding period and to carry over net capital loos. a. Only the first statement is correct b. Only the second statement is correct c. Both statement are correct d. Both statements are incorrect 201. Joahna Corporation realized an ordinary gain of P400,00. Its capital asset transactions during the year are as follows:

Capital gain Capital gain Capital loss Capital loss

Holding period 6 months 2 years 12 months 10 years

Amount P 50,000 45,000 23,000 28,000

What is Joahna Corporation’s taxable income? a. P 484,000 c. P 435,500 b. 444,000 d. 447,000 202. Jose Sese, single, had the following data on income and losses:

Ordinary business income Interest on time deposit with PNB Short – term capital gain Long – term capital gain Short – term capital loss Long – term capita loss

2010 P 56,7000 2,000 5,000 3,600 8,000 4,400

2011 P 60,800 3,000 8,500 5,200 2,900

In 2010, the taxable income before personal exemption of Jose Sese – a. P 58,700 c. P 36,700 b.53,300 d. 56,700 203. In 2011, the taxable income of Jose Sese – a. P 15,600 b. 69,000

c. P 36,000 d. 45,600

204. Santos qualified as head of a house for 2010 tax purposes. Antos 2011 taxable income was P200,00 exclusive of capital gains and losses. Santos had a net long-term loss of P8,000 in 2011. What amount of this capital loss can Santos offset against 2011 ordinary income? (RPCPA) a. P 0 b. 3,000

c. P 4,000 d. 8,000

205. Rose, single, had the following data on income and losses:

Net income Capital gains Capital losses

2010 P 25,000 8,000 40,000

2011 P 95,000 40,000 5,000

The taxable income in 2010 is – a. P 5,000 b. 0

c. P (25,000) d. (57,00)

206. The taxable income in 2011 is – a. P 68,999 b. 55,000

c. P 115,000 d. 10,000

207. All of the following except one, results to a capital gain or loss a. Gain on short sales b. Option loss

c. Worthless securities d. Ordinary gains

208. A transaction in which the specular sells securities which he does not own (he merely borrows the stock certificate through or from his stock broker) in participation of a decline in its pride, and within a reasonably short period of time busy or cover the stock to complete the transaction. a. Wash sale b. Short sale

c. auction sale d. remissible sale

209. A bought from B Corporation ten shares of stock. Sixty days therafter, the corporation was adjudged bankrupt and its stock as worthless. The loss of A to be reported for income tax purpose is classified as (RPCPA) a. A wagering loss b. Non-deducible loss for income tax purposes c. Short-term capital loss d. Casually loss 210. On capital gains tax on real property, which of the following statements is not correct? (RPCPA) a. The tax should be paid, if in one lump sum, within 30 days from the date of the sale. b. The term “initial payment” is synonymous to “downpayment”. c. The installment payment of the tax should be made within 30 days from receipt of each installment payment on the selling price. d. The tax may be paid in installment if the initial payments do not exceed 25 of the selling price.

211. Janel sold her principal residence for P5,000,000 when its fair market value was P6,000,000. The house was purchased five (5) years ago for P3,000,000. Out of the proceeds of P5,000,000. Janel utilized the P4,000,000 for the purchase of a new residential house. The capital gains tax on the sale is a. P 360,000 c. P 72,000 b. 300,000 d. 60,000 212. Based on the problems in number 211 above, what is the cost boss of the new residence? a. P3,000,000 b. 2,400,000 213. Malou has the following data in 2010. Jewelry for personal use Jewelry in a jewelry store Car for persona use Transportation equipment

c. P 4,000,000 d. 5,000,000

6 months 2 months 4 years 12 months

4,200 8,000 (20,00) (10,000)

The taxable income before personal exemption of Malou in 2010 is – a. P 32,200 b. 38,000

c. P 22, 200 d. 42,200

214. Assuming that the net income of Malou in 2011 is P130,00 which incudes a capital gain of P6,000. the taxable income before personal exemption in 2011. a. P 126,000 b. 130,000

c. P 124,200 d. 120,000

215. The capital gains tax – a. P 180,000 b. 120,000

c. P 150,000 d. 210,000

216. The capital gains tax of Mr. Cruz if the proceeds of sale was utilized in acquiring a new residence. a. P 210,000 b. 150,000

c. P 180,00 d. None

217. The amount to be deposited in escrow if the processed of the sale shall be utilized in acquiring a new residence – a. P 210,000 b. 150,000

c. P 180,00 d. None

218. The capital gains tax payable assuming that Mr. Cruz will utilize only P1,5000,000 of the proceeds in acquiring a new residence” a. P 90,000 b. 210,000

c. None d. P105,000

219. Mr. Julio Canlas is not engaged in real estate business. He sold a 100 square meter residential land for P300,000 on March 15, 2011. The land was acquired by purchase on March 5, 2008 for P120,000. For acquisition the land was fenced at a cost of P30,000. A commission of 5% of the sales price was paid to the sales agent. How much is the capital gains tax due? (RPCPA)

a. P 18,000 b. 18,900

c. P 7,200 d. 9,000

220. Cito has the following records of transactions: Capital gains (short-term) on sale of – Domestic shares listed and traded in the stock Exchange Vacant lot, thru a broker, located in Manila (market- value – P7000,000) Residential house in New York City Capital loss (long-term) as sale of Land in Vancouver Canada Family car

P 22,400

150,000 100,000 125,000 50,000

The net capital gain/loss of Cito is – a. P 12,500 c. P 148,500 b. 175,000 d. (25,000) 221. Atty .MoisesDondoyano sold to Jess Abaluyan not traded shares of stocks for a consideration of 2,200.00. At the time of the sale, its fair market value was P500,000. Atty .MoisesDondoyano should pay – a. Capital gains tax b. Donor’s tax

c. Documentary stamp tax d. All of the above

222. In the preceding problem, if later on Jess Abaluyan sells the same shares of stocks to Ed del Rosario for P400,000, the gain subject to tax shall be determined b y deducting the – a. P200,000 from the P500,000 b. 200,000 from he400,000 c. 400,000 from the 500,000 d. 400,000 from the 200,000 223. Rolly sold 1,5000 shares of stocks of achievers corporation. The par value per share was P85 but were acquired by him at P90. On the date of sale, the shares had a selling price of P120 share. The capital gains tax on the sale if the shares are not listed and traded in the Philippines Stock Exchange. a. P 2,250 c. P 14,000 b. 2,265 d. 11,375 224. Ronal sold 1,000 shares of not listed and traded shares of stocks. The data of which are as follows: Selling price P 600,000 Fair market value 620,000 Expenses on the sale 10,000 Purchase price 440,000 Expenses upon acquisition 3,000 The capital gains tax due it – a. P 13,000 b. 14,000

c. P 9,700 d. 12,850

225. Nada sold the following shares of stock during the year Listed and Traded Selling price P 1,500,00 Cost 1,230,000 Date sold 01-20-11 The capital gains tax payable – a. P 3,000 c. P 11,550 b. 32,000 d. 3,150

Not Listed and traded

Listed and traded

P 630,000 570,000 03-16-11

P 210,000 170,000 11-14-11

226. The capital gains tax on the February 13, 2011 sale – a. P 2,750 b. 1,375

c. P 657 d. 55,000

227. The capital gains tax on the April 5, 2011 sale is – a. P 10,400 b. 5,400

c. P 5,200 d. None

228. The capital gains tax/refund on the July 20, 2011 sale is – a. P 3,000 b. (3,00)

c. P 1,500 d. None

229. The final capital gains tax / refund at the end of the year is – a. Tax payable of P1,350 b. Tax refund of P 1,350

c. Tax payable of P2,725 d. Tax refund of P2,725

230. On December 1,2001, Mat Obese whose taxable year is the calendar year, purchased 100 shares of common stock of Michael Company for P10,000. On December 16,2011, he purchased 100 additional shares for P9,000. On January 3, 2011, he sold the 100 shares purchased on December 1, 2010 fro P9000. Which of the following statements is correct on Mat Obese? a. He can claim a deductible loss of P1,000 in 2011. b. He must report a taxable capital gain of P1,000 in 2011. c. He must report a taxable capital gain of P9,000 in 2011 d. He is no allowed to claim a deductible loss on the loss on sale in 2011. 231. Miss Beauty, whose taxable year is the calendar year, and the following stock transactions:  On September 20, 2011 purchase 100 shares of the common stock Ugly Company for P5,000 at P50 per share.  On December 11, 2011 she purchased 50 shares of substantially identical stock for P2,750 or at P55 per share.  On December 26, 2011 she purchased 25 additional shares of such stock of P1,125 at P45 per share.  On January 2, 2012, she sold fro P4,000 the shares purchased on September 20 at P40 per share. How much is the deductible loss and non-deductible loss on January 2, 2012 sales? Deductible Non-deducible a. P 1,000 P 0 b. 0 1,000 c. 125 0 d. 250 750

232. The net capital gain/capital loss (before carry over) in 2011 is – a. P 17,000 b. 9,000

c. P 2,000 d. (7,000)

233. The net capital loss carry-over from 2010 is – a. P 7,500 b. None

c. P 9000 d. 5,000

234. In computing or loss from the sale or other disposition of property acquired as gift or donation, the basis of cost shall be: (RPCPA) a. The fair market value as of the date of acquisition b. The purchase price plus expenses of acquisition c. The latest inventory value d. The same as it would e in the hands of the donor 235. Shaolo received a residential house valued at P2,5000,000 from his parents as a gift. After a month, he sold it to Rudy for P2,000,000 only. How much is the tax liability of Shaolo on the sale? a. P150,000 b. 120,000

c. P100,000 d. None

236. It is important to know the source of income for tax purposes (i.e. from within or without the Philippines) because (RPCAPA) a. Some individual and corporate taxpayers are taxed on their worldwide income while others are taxable only upon income from sources while the Philippines. b.The Philippines imposes income tax only on income from sources within c. Some individual taxpayers are citizens while others are aliens. d. Export sales are not subject to income tax. 237. Mr. Shin, a non-resident alien stockholder, received a dividend income of P300,000 in 2011 from a foreign corporation doing business in the Philippines. The gross of the foreign corporation from within and without the Philippines for three years preceding 2011 are as follows: (RPCPA) Source of Income From with the Philippines From without the Philippines

2008 16,000,000 8,000,000

2009 12,000,000 14,000,000

2010 14,000,000 16,000,000

How much of the dividend income received by Mr. Shinn is considered income from sources within the Philippines. a. Zero b. P 157,500

c. P f150,000 d. 300,000

238. The widow of your best friend has just been paid P1,000,000 on account of the life insurance policy of the deceased husband. She asks you whether she should declare the amount for income tax purposes for estate tax purposes. 1st Advice – The proceeds of life insurance paid of the beneficiary upon the death of the insured are exempt from income tax and need not be declared for income tax purposes. 2nd Advice – The proceeds of life insurance would have to be declared for estate tax purposes if the designation of the beneficiary was irrevocable, otherwise it need not be declared.( RPCPA)

a. Both advice are correct b.1st advice is correct, 2nd advice is wrong c. Both advice are wrong d.1st advice is wrong 2nd advice is correct 239. An ordinary and necessary expenses which is fully documented and supported by receipts may be fully deducted for income tax purposes over and above the limit set by law (RPCPA) a. Medial expense b. Contribution

c. representation d. high school fee

240. Which of the following statement is wrong with respect to deductible expenses incurred by an individual taxpayer? a. A resident citizen of the Philippines who is earning business income abroad is entitled to claim the expense incurred abroad as a deduction from his total gross income. b.A nonresident citizen of the Philippines who earning income as an overseas Filipino worker abroad is entitled to claim the expenses incurred therein as deduction from total gross income. c. A resident citizen of the Philippines who is earning business income abroad, aside from his income in the Philippine’s, is entitled to claim the 40% optional standard deduction as a deduction from his gross income within and without the Philippines. d.A mixed income earner in entitled only to claim the 40% optional standard deduction as a deduction from the business and/or professional income to the exclusion of the compensation income. 241. Which of the following statement is correct a. All compensation payments made by an employer to an employee are deductible to the employer. b.All compensation payments made by an employer to an employee are taxable to the employee. c. All traveling expenses incurred by an employee which are in accordance with the itinerary of travel approved the employer are not taxable to the employee. d.Transportation expenses incurred by an employee are nevertheless deducible to the employer even if they are not incurred while “away from home”. 242. Lahgai Corporation incurred the following expenses. Which of these expenses is nondeductible? a. Insurance premiums on the building b. Salaries of the officials and employees c. Entertaining prospective customers d. Gifts given to public officials who favored Lahgai Corporations contract with the government. 243. Which of the following is a deductible expense for income for purposes (RPCPA) a. Salaries of domestic servants b. Ordinary repair of the personal car c. Provision for doubtful accounts d. None of the above 244. One of the following expenses is deducible from gross income a. Personal, living and family expenses b. Amount paid out for new building or for permanent improvement or betterment, made to increase the value of any property or estate.

c. Premiums paid on a life insurance policy covering the life of the employee when the members of the family the employee are the direct beneficiary under such policy. d. Any amount expended in restoring property or in making good exhaustion thereof for which an allowance is or has been made. 245. All of the following, except one, are not deductible from gross income a. Tuition fees and other expenses of the taxpayer’s children. b. Replacement of the road of the office building c. Premiums paid in insuring the life of the Corporate President, appointing the corporation as the beneficiary of the policy. d.Premium paid on a life insurance policy of a rank-and-file employee with the latter’s children as the appointed beneficiary. 246. In 2011, Enzo Corporation paid the following premiums to an insurance company in insuring the life of its officials and employees. Official / Employee Rank-and-file Personnel Manager Treasurer General Manager Board Chairman

Beneficiary Children Parents Corporation Corporation Corporation

Premiums Paid P 5,000 10,000 15,000 15,000 15,000

The deductible expenses on the insurance premiums paid by the corporation is – a. P 60,000 b. 45,000

c. P 5,000 d. 15,000

247. The following are examples of corporate expenses deductible from gross income, except one: (RPCPA) a. Representative expenses designed to promote business b. Contributions to drum up business like contribution of soft drinks to barrio fiestas. c. Expenses to an advertising firm inorder to create a favorable image for the corporation. d. Premiums on life insurance covering the life of an employee if the beneficiary is his heirs. 248. Flores Corporation took two keymen insurance on the life of the President Mr. Chan. 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. Chan’s wife as its irrevocable beneficiary. Q1: Are the insurance premiums paid by Flores Corporation in both policies deductible? Q2: Will the insurance proceeds be treated as income subject to tax by the corporation and by the wife? (RPCPA) a. Yes to 1st question and No to 2nd question b. Yes to both questions c. No to 1st question and Yes to 2nd question d. No to both questions 249. The entry in the books of Lexor to record the expenses incurred for minor repair is – a. Building Cash b. Lese expense – Leslie Cash c. Reparis expense Cash d. No entry

P 30,000 P 30,000 30,000 30,000 30,000 30,000

250. The entry in the books of Lexor to record the expenses incurred for major repair a. Building Cash b. Repairs expenses Cash c. Allowance for depreciation Cash d. No entry

P 60,00 P 60,000 60,000 60,000 60,000 60,000

251. Suppose the major repair increased the value by P40,00 and it also prolonged the life o asset, the accounting entry to record the repair in the books of Lexor Corporation is – a. Allowance for depreciation Cash b. Building Cash c. Building Allowance for depreciation Cash d. None of the above

P 60,000 P 60,000 40,000 40,000 20,000 60,000

252. Choose the best answer: Regina Monde College, Inc. – a proprietary educational institution, spent P10 million for the construction of a new school building. The amount spent for the construction – a. Must be claimed as expenses in the year of completion b. Capitalized and claim annual depreciation over the life of the building c. Capitalized or expensed outright at the option of the school d. Capitalized expenses outright at the option of the BIR. 253. Allowance Corporation is engaged in sales of goods and services with net sales/net revenue of P400,000 and P200,00 respectively. The actual entertainment, amusement and recreation expense for the taxable quarter amounted to P6,000. Allowance Corporation can claim an entertainment, amusement and recreation expense on the sale of goods and services, respectively, of – a. P 4,000 and P 4,000 b. 4,000 and 2,000

c. P 2,000 and P 4,000 d. 2,000 and 2,000

254. The following statements relate to a senior citizen. Which statement is true? a. An American citizen who visits the Philippines on a vacation trip in Boracay may be entitled to claim 20% discount on hotel rates and other establishments. b.As a rule, a senor citizen is exempt from income tax and shall not be required to file an income tax return. c. The amount of sales discounts granted to senior citizens shall be allowed as deduction in computing the taxable income of the establishment. d. All compensation payments made to a senior citizen employee shall entitle the employer to an additional deduction of 15% of the total amount paid as salaries and wages. 255. The following characters are senior citizens. Which statement is correct? a. Snape, a part-time faculty member of the University of Santo Thomas. Manila earning a salary and allowances of P30,000 a month is required to pay income tax on his salary. b.Hagrid, 80 years old, a retired government employee, is a part-time accounting teacher of Hogwarts School. If his only source of income is his monthly wage from the University of P2,500 a month, he is not exempt from the payment of income tax.

c. Dobby is part-time faculty member of Wesleyan University Philippines, Cabanatuan City earning a monthly income of P3,000. If he also owns a small space which is being leased at a monthly rental of P1,000, he shall be required file return and pay income tax if his only dependent is a small while dog name blackie. d. Ron Weasly who is earning a monthly rental income of P5,000 is not taxable on his income because he is a minimum wage earner. 256. Lolo Daddy, 70 years old, had the following income during the year. Which of them is not taxable? a. Salary, P60,000 b. Interest on bank deposit with Banco de Oro, P 500 c. Royalties on books authored by Lolo, P 50000 d. Winnings in lottery, P 20,000 257. Which of the following items is correct? a. Interest incurred on loan from a brother is deductible. b. Interest expense incurred on unpaid value-added tax is reduced by 42% of interest income subjected to final tax. c. Interest payable which had already prescribed is deductible if paid voluntarily by the taxpayer. d. Interest incurred to acquire a business asset may be added to the cost of the property 258. Interest on business is deductible for income tax purposes. However, one of the following is not deductible (RPCPA) – a. Interest on delinquency tax b. Interest on indebtedness incurred to purchase delivery equipment c. Interest on indebtedness secured to purchase a tax-exempt security d. None of the above 259. Which interest is deductible? a. Interest incurred on unpaid value-added tax b. Interest on loan by an individual from a corporation it 60% of the outstanding stock of the latter is owned indirectly by such individual c. Interest on loan between members of a family d. Interest on loan by a fiduciary of a trust and a beneficiary such trust. 260. A deductible interest expense – a. Interest on loan between members of a family b. Interest on loan that was used to finance the construction of the taxpayer’s residential house. c. Interest on tax delinquency. d. Interest on indebtedness to finance petroleum operations. 261. On January 2, 2011 MangOtang contracted a 1 – year P100,000 loan from Metrobank for the purchase of computers. The equipments which had a depreciable life of eight (8) years were acquired on April 1, 2011. The interest expense for one (1) year amounted P15,000. In the same year, his bank deposit with PNB earned an interest income of P2,000. During the year, he incurred an interest expense on unpaid business tax of P600. The deductible interest expense of MangOtang in 2011 is – a. P 14,240 c. P 13,600 b. 14,760 d. 14,940

262. In numbers 261 above, the deduction of MangOtang in 2011 assuming that the interest on loan was capitalized – a. P 14,375.00 b. 15,000.00

c. P 10,7814.25 d. None

263. In December 2008, a taxpayer donated to his son 3,000 shares of stock of San Manuel Corporation. For failure to file a donor’s tax return on the donation within the statutory period, the taxpayer was assessed the sum of P100,000 as donor’s tax plus 25% surcharge of P25,000 and 20% interest or P20,000 which he paid January 2010. On June 20, 2011 he filed his income tax return fro 2010 claiming, among others, a deduction for interest amounting to P1,500. On June 5, 2011, the taxpayer filed an amended income tax return for the same calendar year 2010, claiming therein on additional deduction in the amount of P20,000 representing interest paid on the donor’s tax. A certain for refund of alleged overpaid income tax for taxable year 2010 was filed with the Commissioner which was subsequently denied. The commissioner pointed out that a tax is not indebtedness and that there is a fundamental distinction between a “Tax” and a “debt”. According to the Commissioner, the deductibility of interest on indebtedness from a person’s income tax cannot extend to interest on taxes. Q1: Is the interest on the donor is tax deductible? Q2: Is the interest on the income tax deductible? a. Yes, Yes b. No, Yes

c. Yes, No d. No, No

264. If a stockholder receives a taxable tock dividend, what is the measure of income applicable to him? (RPCPA) a. Par value of the shares on the date he receives them. b. Fair market value of the shares on the date of declaration c. The adjusted cost of the old shares and the new shares of the corporation d. The book value of the shares of the preceding calendar year 265. Generally, sales of real property are subject to tax. Which of the following sales of land is not allowed by the law to be subjected to tax? (RPCPA) a. Land sold by the church b. Land foreclosed by the bank c. Land sold to government corporation d. None of the above 266. One is not a deductible tax (RPCPA) a. Local business tax b. Value-added tax c. Privilege tax d. Occupational tax 267. One is a deductible tax (RPCPA) a. Estate tax b. Franchise tax

c. Donor’s tax d. Special assessment

268. One is entitled tax credit for taxes paid to foreign country (RPCPA) a. Resident aliens b. Domestic corporation c. Nonresident aliens with reciprocity d. Non-resident citizens 269. One is entitled to tax credit for taxes paid to foreign country (RPCPA) a. Non-resident aliens b. Foreign corporations c. Resident aliens with income derived solely from sources within the Philippines. d. Beneficiaries of the estates and trusts. 270. The following taxpayers an claim tax credit except one (RPCPA) a. Domestic corporations b. Members or beneficiaries of partnership or trust c. Resident Filipino citizens d.Nonresident aliens 271. In 2011, Vicor Co., a domestic corporation has net income from which the Philippines, P200,00 and from the U.S.A P300,00. Income tax paid on income from USA is P95.000. The tax credit on income tax paid to US government is (RPCPA) a. P105,000 b. 60,000

c. P 90,000 d. 110,000

272. International Corporation, a domestic corporation, has the following data for the calendar year. The corporation signified its intention to claim tax credits on income taxes paid to the foreign countries:

Country Philippines United State Japan

Gross Income P1,000,000 400,00 300,00

Allowable Deductions P 800,00 200,00 200,00

Tax Paid P– 80,000 25,000

The income tax payable by International Corporation is a. P 75,000 c. P 60,000 b. 65,000 d. 72,000 273. Peñafrancia D. Caceres, single has the following data during the year: Gross income, Philippines Gross income, United States Expenses, Philippines Tax paid in the State of California Federal Income Tax Paid

P 120,000 200,000 80,000 40,000 8,500

If the foreign tax paid is claimed as deduction, the income tax due is – a. P 5,1 500 b. 5,725

c. P 12,800 d. 1,650

274. In Numbers 273, if you are the taxpayer will you out to claim the foreign tax paid as tax credit or as a deduction? a. Tax credit because the tax liability would be P1,350 only b. Tax credit because the tax liability would be P2,500 only

c. Education because the tax liability would be P2,150 only. d. Deduction because the tax liability would be P7,000 only 275. One is not a deductible loss (RPCPA) a. Loss due to removal or demolition of old building, the scrapping of old machinery or equipment to renewal or replacement. b. Loss due to removal of building or real estate purchased when the purchase was for the acquisition of the land and without intending to use the building. c. Loss in value of securities of such extent that the securities have become worthless and are written off. d. Loss in usefulness in business of an asset so that the business in discontinued or the asset. Discarded. 276. Max and Jess are business competition. Max purchased a land beside the business premises of Jess with the intention of erecting a new 4 storey building. The land which was valued at P1,000,000 had an almost dilapidated building thereon assessed at P150,000. He spent P40,000 for it s demolition and sold its scrap for P25,000. The construction of the new building cost him P10,000,000. When Jess knew the intention of Max, he decided also to demolish his 20 year old building and to put a new one. The demolition cost him P80,000 but raised P35,000 from the scrap, and the construction cost of the new 6-storey building was P15,000,000. A between Max and Jess, who is entitled to claim loss as deduction from gross income? a. Max only b. Jess only

c. Both of them d. Neither of them

277. Bravo Company purchased a piece of land with a building thereon for P1,500,00 allocated under a contract of sale of P1,000,000 for the land and P500,000 for the building it had no use for the building at the time of purchase and it was its intention to remove the building in order to build its factory. It incurred demolition the company P2,500,000. The total value of the land is – a. P 1,000,000 b. 2,615,000

c. P 1,615,000 d. 1,535,000

278. Gina Company had an old warehouse which had a cost of P1,2000,000. The company demolished the warehouse when it had a book value of P200,000inorder to construct a new and bigger warehouse. The demolition cost amounted to P25,000 while the scrap were sold for P10,000. In its accounting entry. Gina Company should debit a loss on retirement of old building of a. None b. P 200,000

c. P 185,000 d. 215,000

279. A building was partially destroyed by fire in 2010, it had a book value of P4,000,000. The insurance company was willing to pay P3,000,000 which was refused by the owner of the building. Finally, the claim was settled in 2011 for P3,500,000 proceed is (RPCPA) a. Exempt from income tax b. Taxable in full

c. subject to final tax d. Partly taxable, partly exempt

280. Refer to item 279 data/ The taxpayer can claim a deductible loss at (RPCPA) a. P1,000,000 in 2010 b. 1,000,0000 in 2011

c. P500,000 in 2010 d. 500,000 in 2011

281. In 2010, Pay’s residence was totally destroyed by fire. The property had an adjusted basis and a fair market value of P130,000 before the fire. During 2010, Pay received insurance reimbursement of P120,000 for the destruction of his home. Pay’s 2010 adjusted gross income was P70,000. Pay had casualty gains during the year. What amount of the fire loss was Pay entitled to claim as an itemized deduction on is 2011 tax return? (RPCPA) a. P 0 b. 8,500

c. P 8,600 d. 10,000

282. In 2009, Violeta constructed on office building worth P2,000,000 in 2011 when it had on accumulated depreciation of P72,000 the building was totally destroyed by fire. Assuming that the amount recoverable from Stan Insurance Company is P500,000. The deductible loss of Violeta is – a. P 1,928,000 b. 2,000,000

c. None d. P1,428,000

283. Based on the data in No. 282 above, the accounting entry in the books of Violeta a. Fire loss Building

P 2,00,00

b.Fire loss Allowance for depreciation

1,428,000 72,000

P 2,000,000

1,500,000 c. Fire loss Receivable form Stan Insurance Co.

500,000

d. Receivable from Stan Ins. Co. Allowance for depreciation Fire loss

500,00 72,000 1,428,00

500,000

2,000,000 284. The following properties were burned in a fire which broke out in the company premises: Property A Property B Type of loss Total Partial Cost P800,00 P1,200,000 Accumulated depreciation 550,000 600,000 Insurance recovery 200,000 150,000 Replacement cost of damaged portion 500,000 The deductible loss on Property A is – a. P 250,000 b. 80,000

c. P 50,000 d. 600,00

285. Based on the data in Number 284 above, the deductible loss on property B is – a. P 600,000 b. 350,000

c. P 5000,00 d. 1,200,000

286. Carla Construction Corporation, a domestic corporation had the following data: Year 2010: Gross income from services P 3,200,00 Operating expenses 3,450,000 Rent income of heavy equipment 70,000 Dividend received from Johna Corporation 36,500 Capital gain on sale of shares of stocks (not listed) 12,250

Year 2011 Gross income from services Operating expenses

3,560.000 1,250,000

In 2011, Carla Corporation incurrent the following losses: Fire loss of a company building Total loss Cost Accumulated depreciation Amount recovered from Paratago Insurance Co. Scrap (taken away by the insurance company)

P 5,000,000 3,000,000 750,000 5,000

Accident loss of a company dump truck: Partial loss Cost of dump truck P 500,000 Accumulated depreciation 250,000 Restoration cost 150,000 Amount recovered from Madulag Insurance Co. 65,000 287. How much is the net operating loss carry-over to 2011? a. P(131,250) b. (119,000)

c. P(180,000) d. (250,000)

288. How much is the casually loss in 2011? a. P 1,335.00 b. 2,150.00

c. P 1,400.00 d. 1,435.00

289. How much is the income tax due in 2011? a. P238,500 b. 278,250

c. P132,462.50 d. 97,387.50

290. Jun a sales agent on commission basis of Contract Enterprises which is engaged in the sale of paper and proper products. While in the course of his travel towards Bicol Regiopn was apprehended by members of the New Peoples Army (NPA) under MelitoGlor Command along Quezon Province. His service car owned by Contrade Enterprises was seized. The next day, he learned that the NPAs and the members of the Philippine Army under 5 1st Brigade had a chance encounter. Using heavy weapons, the military fired at the NPAs that tried to escape with the use of his car. All the members of the NPA were killed and the car was total wreck. Is the value of the car deductions as casualty loss? a. Yes, it is deduction to Jun begin in possession of the car at the time it was seized. b. Yes, it is deductible to Comrade Enterprises provided that the other requisites for deductibility must be satisfied. c. No, casualty loss refers only to fire, earthquake, volcanic eruption and other non-man mode calamities. d. No, because it was intentionally wrecked by the members of the Philippine Army. Quinnie Company acquired machinery at a purchase price of P5000,000. Freight and installation cost amounted to P20,000. At a date in a taxable year when the accumulated depreciation was P300,000. Quinie Company retired the machinery from the business because the increase in the cost of production and the change of manufacture of the product to which the machinery is exclusively devoted made tis continued profitable use impossible. The scrap value of the machinery was P10,000. The loss on the retirement of the machinery is – a. P220,000 b. 280,000

c. P200,000 d. 210,000

291. Quinnie Company acquired machinery at a purchase price of P.500,000. Freight and installation cost amounted to P20,000. At a date in a taxable year when the accumulated depreciation was P300,000Quinnie Company retired the machinery from the business because the increase in the cost of production and the change of manufacture of the product to which the machinery is exclusively devoted mode its continued profitable use impossible. The scrap value of the machinery was P10,000. The loss on the retirement of the machinery is – a. P220,000 c. P200,00 b. 280,000 d. 210,000 292. Floriano had the following records of income, expenses and losses during the year. Wageringg gains (wagering losses, P50,000) Temporary decline in value of stocks of TY Corp. Sale of typewriters which were rendered absolete By computers (book value P 115,000)

P 30.00 12,500 80,000

How much loss is deductible by Floriano? a. P97,500 c. P 55,00 b. 35,000 d,. 110,000 293. All of the following, except one, are requisites in the carry over of net operating loss a. There must be no substantial change in the ownership of the business. b. Carry-over is not allowed if the corporation is subject to MCIT during the taxable year. c. Even if the corporation paid tax based on MCIT, the running of the prescriptive period is not interrupted. d. The carry-over is good only for one (1) year. 294. Statement 1: The term “net operating loss” shall meant the excess of allowable deduction over gross income of the business in a taxable year. Statement 2: Nonresident foreign corporation are not entitled to deduct NOLCO from the gross income. Statement 3: The NOLCO which had not been offset as deduction from gross income shall be carried over as a deduction from gross income for the next taxable year immediately following the year of such loss. Which of the above statements is/are false? a. Statement 1 only c. Statement 3 only b. Statement 1 and 2 d. None 295. The taxable income / operating loss in 2009 is – a. P (575,000) b. (407,000)

c. P (427,000) d. 1,068,000

296. In Question 295 the taxable income / operating loss in 2010 is – a. P 0 b. 274,400

c. P (132,600) d. 254,400

297. - The net operating loss carry over in 2011 is – a. P 18,000 c. P 170,600 b. None d. 18,000

298. The taxable income / operating loss in 2010 is – a. P 261,400 b. Zero

c. P 274,400 d. 1,286.400

299. The taxable income / operating loss in 2011 of Betsy is – a. P 190,700 b. 935,500

c. P 248,200 d. 232,500

300. Divine Word Company purchased shares of stock of Nueva Caceres Company for P60,000 and of Ateneo Company for P30,00. At the end of the taxable year. It ascertained that its Nueva Caceres Company stock was worthless because of the complete insolvency of the corporation, and its Ateneo Company had declined in value of P28,000. Divine Word Company should recognize a loss on its investment in Nueva Caceres and Ateneo Company shares of – a. None b. P 62,000

c. P60,000 d. 90,000

301. Neneng Company was merged into Totoy Company. Neneng Company transferred all its properties with a book value of P4,000,000 to TotoyCompnay for which it received shares of the latter with a fair market value of P23,6000,000. Sanko was stockholder of Neneng Company (which he acquired at a cost of P500,000) when the manager was effected and received shares of stock of Totoy Company with a fair market value of P360,00. The amount of loss deductible by Neneng Company is a. P 400,000 b. 3,000,000

c. P 140,00 d. None

302. In number 301 above, the amount of loss deductions by Totoy is a. P400,000 b. 140,000

c. P500,000 d. None

303. Quengqueng Company transferred properly to Rayray Company. As a result of the transfer. Quengqueng Company acquired control over Rayray Company. The property had a book value of P1,000,000 to Quengqueng. As a consideration, it received shares of stock of Rayray with a fiar market value of P960,000. As a consequence of the transaction Quengqueng company shall claim a deductible loss of – a. P1,000,000 b. 960,000

c. P40,000 d. None

304. Sharon, single, has the following data in 2010 and 2011; 2010 Net income before personal Exemption and bad debt Less: Bad deb written off Net income offer bad debt

Case 1

Case 2

Case 3

P 50,000 70,000 (20,000)

P 50,000 68,000 (18,000)

P 50,000 30,000 20,000

2011 Bad debt recovered 70,000 60,000 In 2011, the taxable amounts before personal exemption are: Case 1 Case 2 Case 3 a. P 50,000 P 50,000 P 50,000 b. 50,000 42,000 30,000 c. 70,000 68,000 30,000 d. (20,00) (8,000) 20,000

30,000

305. The following were taken the income statement of ABC Corporation for the taxable year 2011 Gross profit on sales Less: Deductible expenses Provision for bad debts Net income before income tax

P 800,000 P 440,000 80,000

520,000 280,000

Additional information: a. Accounts written-off during the year and changed to allowance for bad debts – P50,000 b. Recoveries on accounts receivable previously written-off in 2010 and credited to allowance for bad debts. Allowed as deduction by the BIR – P30,000 Disallowed by the BIR as deduction – P20,000 The net income before income tax of ABC Corporation is (RPCPA) a. P 280,000 b. 260,000

c. P 330,000 d. 340,000

306. Which of the following methods of depreciation is not expressly allowed under the law? a. Output or production method b. Sum-of-years digits method

c. Straight line method d. Declining balance method

307. Which of the following assets is subject to depreciation for income tax purpose? (RPCPA) a. Inventories or stock in trade b. Goodwill

c. Equipment used in business d. Residential house

308. A store building was constructed on January 2, 2006 with a cost of P570,00. Its estimated useful life is 60 years with scrap value of P70,000 after 16 years. In January 2011, replacement of some worn-out pars of the building costing of P50,00 was spent. After the repairs, the building was appraised with a fair market value of P770,00. The allowable deduction for depreciation for the year 2011 is (RPCPA) a. P35,795.45 b. 43,750.00

c. P49,431.82 d. 31,250.00

309. Which of the following is deductible from gross income even if the payment is not connected with business? a. Contribution of the employer to the pension trust of the employee b. Charitable contributions c. Income tax paid in foreign country d. Traveling expenses 310. The amount of charitable contribution of property other than money shall be based on a. Fair market value b. Book value

c. lower of cost or market d. acquisition cost

311. Angel is a cash basis sell-employed air-conditioning repairman with 2011 gross business receipts of P200,00 Angel’s cash disbursement were as follows: Air conditioning parts Yellow pages listing

P 25,000 20,000

Estimated national income taxes on Self-employ employment income Business long-distance telephone calls Charitable contributions

10,000 4,000 2,000

What amount should Angel report as self-employment income before personal exemption? (RPCPA) a. P151,000 b. 149,000

c. P141,000 d. 139,000

312. What would be the allowable deduction for P10,000 contribution made by a resident citizen to a charitable institution, from his P60,00 net income before contributions? a. P 6,000 b. 7,000

c. P3,000 d. 10,000

313. Notre Dame Corporation had the following data in 2011: Gross income Deductions (except contributions) Donation to the Rehabilitation of Veterans, Inc. Donation to the Roman Catholic Church Donations to victims of Payatas tragedy The taxable income of the corporation is – a. P92,000 b. 93.500

P 500,000 400,000 3,000 1,500 5,000

c. P88.50 d. 100,000

314. Eugene had the following date during the year Gross income from business Capital gain Capital loss Deductions Donation to an accredited NGO Donation to church

P 1,000,000 50,000 20,000 400,000 30,000 20,000

The taxable income of Eugene if he is an individual taxpayer single, with a compensation income during the year of P40,000 a. P550,000 b. 600,00

c. P560,00 d. 570,000

315. In number 314 data, how much is the taxable income if Eugene is a corporation (disregard compensation income) – a. P 670,000 b. 640,000

c. P 580,000 d. 570,000

316. Santy made a contribution of P15,000 to t. Jude Parish Church. He had a gross income from business of P500,000 and deductions (excluding contribution) of P400,000. From this contribution, how much will be allowed as deduction from is gross income? a. P 15,000 b. None

c. P 10,000 d. 100,000

317. An individual taxpayer made the following contributions: To Fatima Catholic Church To beggars To Polytechnic University of the Philippines To Barangay Tikapo

P 20,000 500 25,000 10,000

The amount of acontributions deductible subject to 10% limitation is – a. P 20,000 b. 30,000

c. P 55,000 d. 55,500

318. The Cancer Hospital of the Philippines is a charitable institution. Mr. Biglang-awa visited the hospital on is 60th birthday. He donated P500,000 to the hospital and P10,000 to a cancer within who is only ten (10) years old. He also brought with him a chain restaurant mascot that played with the children patients while eating the popular production of the restaurant. It had cost him P15,000. Which of the above contributions is qualified as deduction from the gross compensation income of Biglang-awa if he is a newly retired government official who si not engaged in business? a. Only the P500,000 b. The P500,000 and the P10,000 c. The P500,00, P10,000 and the P15,000 d. None of them 319. Using the same data in Number 318 above, which of the contribution is/are qualified as deduction to Biglang-awa if he is engaged in business? a. Only the P500,000 b. The P500,000 and the P10,00 c. The P500,000, P10,000 and the P15,000 d. None of them 320. The taxpayer had had the following data in 2011: Gross receipts Cost of services Deductions Capital gain Capital loss

P 1,450,000 565,300 325.800 25,500 6,000

If the taxpayer is single, with one dependent child, the taxable income if he availed of the optional standard deduction is – a. P 870,000 b. 814,500

c. P 475,320 d. 503,400

321. In number 320, the taxable if the taxpayer is a corporation is – a. P550,320 b. 814,500

c. P542,520 d. 889,500

322. A hybrid method of accounting is – a. The method under which expenses in the production of crops are deducted in the year in which the gross income from the crop has been realized.

b. A method under which the taxpayer reports his income and expenses by employing the combination of cash and accrual method. c. Also known as cash receipts and disbursements method. d. A method in which the taxpayer reports income in the year it is earned. 323. Taxpayer is required to report income for the tax year in which payments are actually or constructively received while expense are deducted in the year paid a. Accrual basis b. Cash basis or cash receipts and disbursements method c. Hybrid method d. Crop year basis 324. Under this method of accounting income is reported in the year it is earned a. Cash basis b. Crop year basis

c. constructive receipt of income d. accrual method

325. Ester uses accrual method of accounting. She owns a land which she leased to Gordon for 2 years at an annual rental of P10,000. On July 1, 2009, she received P200,00 from Gordon representing the rental covering the period July 1, 2009 to June 30, 2011. In 2009, Ester will report an income subject to tax of: a. P 50,000 c. P100,000 b. 200,000 d. 50,000 326. Based on the data in No. 325 above, Gordon, using cash method can deduct an expense of – a. P 50,000 b. 200,000

c. P 100,00 d. 150,000

327. All of the following except one, are considered as “constructive receipts” for income tax purposes. Which is the exception? a. The share of the profits of a partner in a general professional partnership b. Interest credited on bank savings deposit. c. Band interest coupons which have murdered but which have not been redeemed d. Property borrowed by the taxpayer. 328. Under this method of reporting income, the taxpayer reports a percentage of the gross income from a long-term contract based on the portion of work that has been completed. a. Accrual basis b. Cash basis c. Percentage of completion method d. Hybrid method 329. All of the following, except one, are not taken into account in determining the correct amount of initial payments. a. Commissions b.Other selling expenses c. Installment payments in the year of sale d. Gross profit

330. All of the following except one, are not taken into account in determining the correct amount of initial payments. a. Commissions b.Other selling expenses c. Installment payments in the year of sale d. Gross profit 331. Which of the following statements is false? In installment method of reporting income a. If the property sold is not a subject of mortgage, the selling price is equivalent to the amount of contract price. b. The initial payment includes the excess of mortgage over cost, if any. c. The gain on sale is computed by subtracting the book value from the selling price of the property if the property is a capital asset. d. An installment payment of tax may also be made even if the asset is subject to capital gains tax. 332. Under installment method of reporting income tax, the amount of tax payable in the year of sale of a vacant lot is computed by applying the following formula: a. Downpayment x Final tax due Contract price b.Initial payment x Final tax due Selling price c. Final tax duex Collection Selling price d.Initial payment x Final tax due Contract price 333. The initial payment in 2010 is – a. P 50,000 b. 100,000

c. P300,000 d. 400,000

334. The amount of gain to be reported in 2010 is – a. P50,000 b. 25,000

c. P 37,500 d. 12,500

335. The amount of gain to be reported in 2011 is – a. P 50,000 b. 25,000

c. P 37,500 d. 12,5000

336. The following statements, except one, are wrong. Which statement is correct? a. The installment method of reporting income is allowed if the initial payment does not exceed 25% of the contract price. b. In installment method, if the seller of the property is an individual the holding period of the capital asset is still applied even if the property is a real property c. If the amount paid at the time of purchase does not exceed 25% of the selling price, of the selling price, the installment method of reporting income may be applied even if the entire price is paid in the year of sale. d. Reporting of income under the installment method is based on the percentage of collection of the selling price. 337. The following statements about installment method of reporting income are wrong. Which is the receptionist?

a. If the buyer assumes an unpaid mortgage on the property sold the contract price is les than the selling price. b. The excess of mortgage over cost is added to the initial payment in computing the amount of cash paid as downpayment. c. If a mortgage has been assumed by the buyer but the acquisition cost of the property is more than the mortgage, the amount of selling price is equal to the contract price. d. If the initial payment exceeds 25% of the selling price, the sale shall be reported under cash method of reporting income. 338. The initial payment is – a. P100,000 b. 250,000

c P 15,000 d. 200,000

339. The selling price of the property is – a. P 150,000 b. 550,00

c. P 700,00 d. 250,000

340. The contract price is – a. P 150,000 b. 550,00

c. P 700,000 d. 250,000

341. The final tax payment in 2010 is – a. P 42,000 b. 25,200

c. P 9,000 d. None

342. The final tax payable in 2011 is – a. P42,000 b. 25,200

c. P 16,800 d. None

343. The income to be reported by Abunda in 2010 is 0 a P 45,000 c. 90,000

c. P200,000 d. None

344. The income to be reported by Abunda in 2011 is – a. P 200,000 b. 155,000

c. P 45,000 d. None

345. Jose San Jose sold a commercial building on October 15, 2010 for P2,000,000. The cost of the property was P1,2000,000 while the accumulated depreciation was P400,000. The terms of the sale were: Downpayment P 3000,000 Balance is payable in monthly installment of P 100,000 Beginning November 15, 2010 until fully paid

a. P 75,000 b. 300,00

The income to be reported in 2010 – c. P 45,000 d. 30,000

346. The fringe benefits tax is not imposed on – a. Rank and file employee b. Supervision employee

c. Managerial employee d. All employees

347. Fringe benefits tax is imposed on – a. Rank and file employees b. De minimis benefits c. Supervisory and managerial employees d. Fringe benefits granted for the convenience of the employee 348. Which of the following is subject to fringe benefit tax? (RPCPA) a. Compensation of the rank and file employee. b. Compensation of the supervisory and management employee c. Fringe benefit of the rank and file employee d. Fringe benefit of the supervisory and managerial employee 349. The following statements bout fringe benefits are false. Whish is the exception? a. The amount of de minimis benefits given to rank-and-file employees are no subject to fringe benefits tax. b. The amount of de minimis benefits given to managerial employees are subject to fringe benefits tax. c. The equivalent value of free meals and living quarters which are given to an employee for the convenience-of-the employer are considered as fringe benefits subject of fringe benefits tax. d. The fringe benefit tax is not deduction from gross income a computing the taxable income of the employer. 350. The following earnings are subject to fringe benefit tax, except: (RPCPA) a. Salary or rank and file employee b. Housing necessary for the trade and for the convenience of the employer c. Food allowance for the convenience of the employer and necessary in the conduct of the business. d. All of the above 351. Ditso is employed by Holy Cross Hospital as an ambulance drier with a salary of P4,000 a month. In addition, he is given free meals with a monthly value of P1,500 and living quarters within the hospital compound with an equivalent value of P1,000 a month. The monthly compensation income of Ditso is – a. P 6,5000 c. P5,000 b. 4,000 d. 5,500 352. If the benefits given to Ditso in Number 351 above is furnished by his employer so that his services could easily be availed of whenever some patients will need the urgent services of an ambulance, his monthly compensation income is – a. P6,500 b. 4,000

c. P5,000 d. 5,500

353. The following statements are true, except: (RPCPA) a. Fringe benefit tax shall be treated as a final income tax on the employee withheld and paid by the employer on a quarterly basis. b. The grossed-up monetary value of the fringe benefits is the actual amount received by the employee. c. The grossed-up monetary value of the fringe benefit shall be determined by dividing the monetary value of the fringe benefit by the gross monetary value factor.

d. The person liable for fringe benefit tax is the employer, whether he is an individual, professional partnership or a corporation regardless of whether the corporation is taxable or not or the government and its instrumentalities. 354. Statement 1: A fringe benefit that is exempt from fringe benefit tax is likewise exempt from any other form of income tax. Statements 2: Any amount given by the employer as de minimis benefits to its employees, shall not constitute as deduction upon such employer. Which of the above statements is/are true? a. Statement 2 b. Statement 1

c. Statement 1 and 2 d. Neither statements

355. Sarah, married with three (3) qualified dependent children, a regular employee of Confederate Inc. receiver on Luly 6, 2011 P300,000 as regular monthly salary and half of his 13th month pay amounting to P15,000 plus other benefits such as rice allowance for July of P2,000 incentive pay of P20,000 hazard pay of P1,000 overtime pay of P4,000 and night shift differential of P2,000. Compute the income subject to withholding tax in July a. P 57,000 c. P 45,500 b. 30,000 d. 72,500 356. Mayaman Company owns a fleet of motor vehicles. In 2011, one of the cars which was acquired at a cost of P400,000 was allowed as service vehicle by one of its officials. During the year, its book value amounted to P37,5000. How much was the fringe benefit tax due thereon? a. P96,969 b. 18,823

c. P17,767 d. 88,235

357. Based on the data in Number 356 above, suppose Mayaman Company is just leasing the car that is being used partly for personal and for business purpose and is paying an annual rental of P100,000. The annual fringe benefit tax is – a. P 28,229 b. 23,529

c. P 73,529 d. 25,760

358. In May 2011, a non-stock, non-profit university provided a 3-day vacation to Boracay Island to the University’s Executive Vice-President. The total expense incurred by the school was P20,000. The fringe benefit tax is – a. P 6,400 b. 9,412

c. P 10,303 d. None

359. XYZ Corporation assigned Mr. Passo one of its employees in the head office in Manila to Manage their branch office in Dagupan. The company provided for the residential house of the manager paying to monthly rental of P34,000. The monthly fringe benefit tax thereon in – a. P 16,000 c. P25,000 b. 10,880 d. 8,000 360. Based on the same data in No. 39 above, the deductible expense from the gross income of XYZ Corporation is – a. P 8,000 b. 25,000

c. P 42,000 d. 34,000

361. Xtra Corporation furnished and granted the use of its condominium unit to its Executive Vice-President. The fair market value of the property is P4,8000,000 while the acquisition cost is P3,000,000. The monthly fringe benefit tax due thereon is – a. P 2,941.18 c. P 88,235.00 b. 4,705.88 d. 58,823.53 362. Based on the data in Number 361 above the deductible expense from the gross income of Xtra Corporation is – a. P 14,705.88 b. 4,705.88

c. P 12,4132.35 d 2,941.18

363. Bernard Company provided fringe benefit to its managed employees in the amount of P136,000 and its rank and file employees amounting to P500,00. The deductible expense by Bernard Company is – a. P 186,000 b. 136,000

c. P 50,000 d. 250,000

364. The corporation gave a brand new car to its sales manager. The fringe benefit given is – a. Subject to fringe benefit tax based on the provisions of the tax code. b. Subject to fringe benefit tax it was given to a rank-and-file employee c. Exempt from the fringe benefit tax because it is required by the nature of or necessary to the trade or business of the employer. d. Exempt from the fringe benefit tax because it was given for the convenience of the employer. 365. Frances Corporation gave the following fringe benefits to its employees: To supervision employees To managerial employees To rank and file employees

P 220,000 120,000 60,000

The entry to record the above transaction is – a. Fringe benefits tax 56,471 Fringe benefit expense 400,000 Cash Fringe benefit tax payable b. Fringe benefits tax Fringe benefit tax payable

400,000 56,471 400,000

c. Fringe benefits tax Fringe benefit tax payable

560,000

d. Fringe benefit tax expense Fringe benefit expense Cash Fringe benefit tax payable

160,00 400,000

560,000

400,000 160,000

366. Ivy Corporation has the following journal entry on fringe benefits: Fringe benefit expense Fringe benefit tax expense Cash Fringe benefit tax payable

P 186,000 64,000 P 186,000 64,000

Based on the above accounting entry, the amount of fringe benefit given to rank an file employees – a. P 64,000 c. P 186,00 b. 50,000 d. 250,000 367. Adrian, a supervisory employee of Nagnog Corporation borrowed P50.00 from the company pay able in four (4) months thru salary deduction. If the corporation is charging 4% interest per annum on the loan, the finger benefit tax expense is – a. P 2,000,000 b. 666.67

c. P 627,45 d. 313.73

368. Which of the following statement is false? a. Individual taxpayers shall file their income tax returns on or before April 15 of each year. b. Extension of time for filing income tax returns may be granted by the Commissioner of Internal Revenue. c. Second installment in the payment of income tax must be paid on or before July 1 of the same year. d. Inplaces were there are no accredited banks, the return can be filed with the Municipal Treasurer where the place of business is located. 369. The income tax returns must be file in (RPCPA) a. Duplicate b. Triplicate

c. Quadruplicate d. Quintuplicate

370. One of the following is not an attachment to the income tax return of a company whose gross quarterly sales if P1,500,000. a. Certified balance sheets b. Profit and loss statements c. Schedule of income producing properties d. Summary of taxes paid during the taxable year 371. The income subject to this withholding tax is not includible in the computation of taxable income – a. Witholding tax on compensation income b. Creditable with holding tax c. Final holding tax d. All of the above 372. Which of he following individual taxpayers is not required to file on income tax return? a. A citizen receiving compensation and business income. b. A minimum wage earner who has no other source of income except his employment. c. An employee receiving purely compensation income from the employers. d. An individual receiving purely compensation income from one employer, the income tax of which has been withheld correctly but whose spouse is required to file an income tax return. 373. One of the following individuals is not subject to withholding tax on compensation a. An individual who derives compensation from two or more employers at any time during the taxable year. b. An individual who has compensation and business income c. An individual whose gross income in a year is more than P220,000 d. An individual whose monthly gross compensation income is P8,000

374. Miss May Pag-asa believes in the honesty and capability of mayoralty candidate Cora P. Tu, to lead their town. She, therefore, donated P100,0000 cash to help her admitted candidate win in the May 2010 elections. Q1: Is the donation subject to income tax on Cora P. Tu? Q2: Is Miss Pag-asa required to withhold the 5% creditable withholding tax on the donation? 1st Question 2nd Question a. Yes Yes b. Yes No c. No No d. No Yes 375. In Question 374, suppose Miss Pag-asa decides to use the P100,000 in purchasing campaign material from Nakamra Merchandise for candidate Tu, what will be the consequences this action of Miss Pag-asa? a. The payment constitutes a donation subject to donor’s tax b. The payment is considered as an income of candidate Tu. c. The payment is subject to 5% creditable withholding tax to be withheld by candidate Tu. d. The payment is subject to 5% creditable withholding tax which can be claimed as tax credit by Nakamura Merchandise. 376. The books of accounts or records of the taxpayer must not be kept in the following language (RPCPA) a. Filipino b. Chinese

c. English d. Spanish

377. The signature of the following persons must appear in the income tax return of a corporation except a. President b.General Manager c. Treasurer d. Independent certified public accountant 378. One of the following is required to issue receipts a. Those whose sales are valued at P25 or more b. Market vendors selling exclusively vegetables domestic meat, fruits and other food products. c. When the valued of the merchandise sold is P 5.00 d. Vendors given exemption by the Commissioner of Internal Revenue. 379. Statement 1: Where donor’s tax has been paid on properly receive by a minor from a living parent, income on such property shall be included in the income tax return of the parent. Statement 2: The income tax return of a disabled person may be made by a person charged with the care of his property. Statement 1 a. True b. False c. False d. True

Statement 2 True False True False

380. How long must the books of account be kept? a. Unit he deadline for fling the income tax return b.From the current to the last day of the next taxable year c. Fro a period beginning from the last entry in each book until three years d. For a period beginning from the last entry in each book until the last day prescribed within which the Commissioner is authorized to make an assessment. 381. The following statements are wrong. Which is the exception? a. The taxable income for purposes of income taxation is always equal to the net income in accounting. b. The deductible bad debt in accounting is not necessarily deductible in income taxation c. The deductible expenses in accounting are deductible also in income taxation. d. All recognizable income in accounting are taxable in income taxation. 382. Beauty Trixie Corporation had a net income per books on December 31, 2011 of P220,000. Include in the net income are the following items: Divided income from a domestic corporation, P50,000; Interest on bank deposit (net of tax), P5,00 and provision for bad debts, P35,000. The Taxable income of Beauty Trixie Corporation for the year ended December 31, 2011. a. P130,000 b. 200,000

c. P220,000 d. 165,000

383. The following 2011 data pertains to Analyze Company, a domestic corporation. Gross profit Sunday income Gross income Operating expenses and other charges Net income per books

825,000 70,250 895,250 260,000 635,250

Additional Information: 1.Included in the sundry income are the following: a. Dividends from domestic corporations b. Dividends received from resident foreign corp. c. Proceeds from sale of company assets 2. Included under operating and other charges a. Donation to typhoon victims b. Provision for doubtful accounts c. Local taxes and licenses d. Premium paid on insurance of buildings

P 42,500 15,000 4,750

P 12,000 17,500 8,620 4,5000

3.The company wrote off in 2010 against allowance for bad debts uncollectible receivables amounting to P15,000 which was allowed as deduction from gross income. This amount was recovered in 2011. 4.In October 2010 one of the company’s buildings was totally destroyed by fire when the book value was P260,000. The liability of the insurance company was settled in 2011 and Analyze Company was paid P150,000. The income tax payable in 2009 by Analyze Corporation is – a. P158,320.00 c. P353763.50 b. 184,537.50 d. 158,175.00

384. Statement 1: Personal exemptions differ the amount taxable income from net income. Statement 2: Cost of construction of a classroom building and purchase of other school facilities which are normally capitalized maybe deducted as an expense by a school. a. Statement 1 is false b. Statement 2 is false

c. Both statement are false d. Both statements are not false

385. The income Tax Return (ITR) of Janet, single, for taxable year 2011 reported a taxable income of P520,240. A careful scrutiny revealed that some items included as income and expenses are the following. Income: Compensation income Cash dividend Stock dividends Property dividends Gambling winnings Donation received Gain on sale of capital assets – 15 months Gain on sale of his vacant lot Income on rice land Total

P 180,000 122,800 73,500 27,000 23,100 16,000 8,000 120,000 60,000 630.40

Expenses: Red estate tax P 3,500 Community tax 945 Surcharge – late filing of 2010 income tax return 12,000 Interest on personal loan 24,000 Gambling losses 32,000 Personal and living expenses 50,000 Loss on sale of capital assets – 81/2 months 5,000 Loss on crops due to flood 27,250 Total 154,695 The correct amount of Janel’s taxable income is – a. P 246,940 c. P 66,040 b. 236,840 d. 256,840