OUR LADY OF FATIMA UNIVERSITY C. Enforce all forfeitures, penalties, and fines.

Dela Paz Norte, City of San Fernando (P) D. Mete out sentence of imprisonment for violation of
COLLEGE OF BUSINESS AND ACCOUNTANCY
Final Examination in APP III Tariff and Customs Code.
Accounting Proficiency Program III 11. The Commissioner of Internal Revenue is not authorized
to:
A. Interpret the provisions of the National Internal
GENERAL INSTRUCTIONS: Shade the letter that corresponds to Revenue Code.
your answer. STRICTLY NO CHEATING. B. Promulgate Revenue Regulations.
C. Terminate a taxable period.
D. Prescribe presumptive gross receipts.
12. The provisions in the Constitution regarding taxation are:
THEORIES:
A. Grants of the power to tax.
1. Which is subject to creditable withholding tax? B. Limitations to the power to tax.
A. Winnings C. Grants and limitations to the power to tax.
B. Dividends D. Limitations against double taxation.
C. Professional fees 13. Which of the following violates Constitutional
D. Royalties provisions?
2. Withholding taxes are the primary liability of the: A. Payment of salaries to priests or religious ministers
A. Earner or payee of income. employed by the Armed Forces of Philippines.
B. Payor of income.
B. Imposing tax on properties of religious institutions
C. Payee and payor of income.
which are not directly and exclusively used for
D. Collecting agency of the government.
3. A Canadian who is staying in the Philippines for more religious purposes.
than one year is a: C. Imposition of license for the sale of religious
A. Resident alien. literature.
B. Non-resident citizen. D. Authorizing the President of the Philippines to fix
C. Non-resident alien engaged in trade or business. the rates of tariffs or imposts.
D. Non-resident alien not engaged in trade or business. 14. Which of the following normally pays real property tax?
4. Which is an incorrect statement regarding situs of A. Bantay Bata, a non-profit educational institution.
income? B. Jesus Crusade Movement, a religious institution.
A. Interest income is earned in the residence of the C. University of Pangasinan, a private proprietary
debtor. educational institution.
B. Royalty is earned where the intangible is employed. D. UVS Corporation, a registered trading company.
C. Service income is earned in the domicile of the 15. Which is principally limited by the requirement of due
taxpayer. process?
D. Rent is earned in the location of the property. A. Eminent domain
5. A tax that is imposed upon the performance of an act, B. Police power
the enjoyment of privilege, or the engagement in a C. Taxation
profession is known as: D. All of these
A. Income tax. 16. Which of the following is not an inherent limitation of
B. License. the power to tax?
C. Excise tax. A. Tax should be levied for public purpose.
D. Transfer tax. B. Taxation is limited to its territorial jurisdiction.
6. Which of the following distinguishes license from tax? C. Tax laws shall be uniform and equitable.
A. Unlimited in imposition D. Government agencies and instrumentalities are
B. Imposed for revenue exempt from tax.
C. Does not necessarily renders the business illegal in 17. Which of the following is not within the scope of tax
case of non-payment legislation?
D. Pre-activity in application A. Fixing the imposable tax rate
7. Tax classifications as to object do not include: B. Assessment of the tax
A. Poll tax. C. Determining the subject to be taxed
B. Property tax. D. Determining the purpose of the tax
C. Regulatory tax. 18. Which is not subject to income tax?
D. Excise tax. A. Harvested fruits
8. Which of the following is limited in application? B. Sold crops
A. Tax Laws C. Offset of indebtedness for services rendered
B. Revenue Regulations D. Damages recovered in a patent infringement suit
C. Tax Treaties 19. Which is not subject to final tax to a corporation?
D. BIR Ruling A. Interest income from foreign currency deposits.
9. The principles of a sound tax system exclude: B. Royalty
A. Economic efficiency. C. Prizes
B. Fiscal adequacy. D. None of these
C. Theoretical justice. 20. Royalties on musical composition is subject to:
D. Administrative feasibility. A. 20% final tax
10. The Bureau of Internal Revenue is authorized to do the B. 10% final tax
following, except: C. 0% final tax
A. Assess and collect national taxes. D. Regular tax
B. Issue receipts and clearances. 21. Which is subject to final tax?
 A. Share of the distributive net income of a general 28. Tax imposed on inter-corporate dividends received by a
professional partnership. domestic corporation from a resident foreign
B. Active royalties. corporation is:
C. Prizes not exceeding P10,000. A. Tax exempt.
D. Interest income from foreign bank deposits. B. Subject to 10% income tax.
22. The term “capital assets” includes: C. Subject to 15% final tax.
A. Stock in trade or other property included in the D. Subject to 30% corporate tax.
taxpayer’s inventory. 29. Which of the following statements is correct as regards a
B. Real property not used in the trade or business of resident citizen?
the taxpayer. A. Income from illegal activities is subject to final tax.
C. Real property primarily use for the sale to customers B. Income tax refunds constitute taxable income to the
in the ordinary course of trade or business. taxpayer.
D. Property used in the trade or business of the C. Recovery of bad debts previously written off is part
taxpayer and subject to depreciation. of taxable income.
23. Which is not taxable? D. As a rule, contest awards and prizes are subject to
A. Interest income in government securities. 20% final tax if they amount to more than P10,000 ,
B. Interest income in long-term deposits but pre- otherwise they will be part of taxable income.
terminated by the taxpayer prior to 5 years. 30. Which of the following statements is not correct?
C. Informer’s reward for the discovery of violations to A. Minimum wage earners shall be exempt from the
the provisions of the NIRC. payment of income tax.
D. Gains on redemption of shares in a mutual fund. B. Holiday pay, overtime pay, night shift differential
24. Facilities or privileges furnished or offered by an and hazard pay shall be exempt from income tax.
employer to his employees that are of relatively small C. Prizes and awards granted to athletes in local and
value and are offered or furnished by the employer international sports competitions and tournaments
merely as a means of promoting the health, goodwill, whether held in the Philippines or abroad, and
contentment, or efficiency of his employees. sanctioned by their national sports associations are
A. Fringe benefit exclusions from gross income.
B. Fringe benefit tax D. Benefits received from or enjoyed under the social
C. De minimis benefit security system are exclusions from gross income.
D. Grossed-up monetary value 31. Income tax payments to a foreign country, in the case of
25. The following fringe benefits are not subject to fringe a resident citizen may be claimed as
benefit tax, except: A. Tax credit and deduction from gross income.
A. Fringe benefits given to the rank and file employees, B. Tax credit.
whether granted under a collective bargaining C. Tax credit or deduction from gross income.
agreement or not. D. Deduction from gross income.
B. De minimis benefits, as defined in the rules and 32. Which of the following is taxable?
regulations to be promulgated by the Secretary of A. P 100,000 interest on long-term deposit or
Finance, upon the recommendation of the investment
Commissioner of Internal Revenue. B. P 200,000 gain on sale of 10-year bonds
C. Contribution of the employer for the benefit of the C. P 12,000 prize in supermarket raffle
employees to retirement, insurance, and D. P 1M winning in Philippine Lotto
hospitalization benefit plans. 33. Which of the following statements is true?
D. Fringe benefits furnished or granted by the A. Payments which constitute bribes, kickbacks and
employer to its managerial and supervisory others of similar nature which are necessary to
employees. realize profits are allowed as deductions from gross
26. The following fringe benefits are not subject to fringe income.
benefit tax, except: B. The taxes which are deductible from gross income
include the taxes, interest and penalties incident to
A. If given for the convenience or advantage of the
tax delinquency.
employee.
C. Deductions are amounts allowed by the Tax Code to
B. Benefits given to rank and file employees. be deducted from gross income to arrive at the
C. Contribution of the employer for the benefit of the income tax liability of a taxpayer.
employees to retirement, insurance, and D. Losses from wagering transactions shall be allowed
hospitalization benefit plans. only up the extent of the gains from such
D. If required by the nature of or necessary to the transactions.
trade, business, or profession of the employer. 34. This is not deductible from gross income
27. Which of the following taxpayers whose personal A. Transportation expenses from the main office to the
exemption is subject to the law of reciprocity? branch.
A. Non-resident citizen with respect to his income B. Transportation expenses from home to the office
derived outside the Philippines. and from the office back to home.
B. Non-resident alien who shall come to the Philippines C. Travel expenses on business trips.
D. Travel expenses while away from home in the
and stay therein for an aggregate period of more
pursuit of trade, business or profession.
than 180 days.
35. The phrase “related taxpayers” will apply to the
C. Resident alien deriving income from a foreign entity. following, except:
D. Non-resident alien not engaged in trade or business A. Between members of a family.
in the Philippines whose country allows personal B. Between the grantor and a fiduciary.
exemption to Filipinos who are not residing but are C. Between a fiduciary of a trust and a beneficiary of
deriving income from the said country. such trust.
 D. Between an individual and a corporation more than D. An unmarried individual with a child out of the
50% in value of the outstanding stock of which is wedlock can claim a personal exemption as a head
owned, directly or indirectly by or for such of the family plus additional exemption.
individual, in case of distributions in liquidation. 44. With regard to deduction for premiums on
36. The optional standard deduction for corporation is hospitalization and health insurance, which of the
A. 10% of the gross income following statements is wrong?
B. 10% of the gross sales/receipts A. Allowed as deduction even if income is from
C. 40% of the gross income compensation only.
D. 40% of the gross sales/receipts B. Allowed as deduction even if income is from
37. The optional standard deduction for individuals is business or practice of profession.
A. 10% of the gross income
C. Allowed as deduction even if mixed income.
B. 10% of the gross sales receipts
D. Allowed as deduction only if the taxpayer is taking
C. 40% of the gross income
D. 40% of the gross sales/receipts itemized deductions from gross income.
38. Interest expense incurred to acquire property used in 45. Which of the following dependents will qualify a single
trade or business or exercise of a profession is: taxpayer as head of the family?
A. Not allowed as a deduction against gross income. A. Taxpayer’s brother, 22 years old, unemployed,
B. Required to be treated as a capital expenditure to unmarried, living with him and dependent upon him
form part of the cost of the asset. for support.
C. Allowed as a deduction or treated as a capital B. Taxpayer’s sister, 18 years of age, unemployed,
expenditure as the option of the taxpayer. unmarried, living with their parents, but dependent
D. Allowed as a deduction or treated as a capital upon him for chief support.
expenditure at the option of the government. C. Taxpayer’s illegitimate son, 12 years old,
39. For individuals with gross compensation income, the unemployed, single, living with him and dependent
following maybe deducted, except:
upon him for support.
A. Personal exemptions.
D. Taxpayer’s godchild, 10 years old and dependent
B. Additional exemptions.
C. Optional standard deduction. upon him for chief support.
D. Premium payments on health and/or hospitalization 46. For income taxation purposes, the term “corporation”
insurance. excludes one of the following:
40. For mines other than oil and gas wells, a net operating A. Ordinary partnership
loss without the benefit of incentives under Executive B. An incorporated business organization
Order 226, as amended, otherwise known as Omnibus C. General professional partnership
Investment Code of 1987, maybe carried over as a D. Business partnership
deduction from taxable income, if incurred in any of the: 47. The taxpayer is allowed to claim additional exemptions
A. First 10 years of operation. for the following, except:
B. First 4 years of operation. A. Legitimate daughter who got married on December
C. First 3 years of operation. 31 of the taxable year, one day before she turned
D. First 5 years of operation.
22.
41. Using the preceding number, such net operating loss can
B. Illegitimate son, minor who died December 31 of
be carried as a deduction from taxable income, within
how many years immediately following the year of such the previous year.
loss? C. Legally adopted daughter, 25 year old but incapable
A. 5 years of self-support due to mental defect.
B. 3 years D. Recognized natural son who celebrated his 21 st
C. 10 years birthday on January 1 of the taxable year.
D. 4 years 48. Which of the following is not a condition imposed by the
42. Which of the following statements is not correct? Constitution for the exercise of the power of eminent
A. In the case of married individuals, where only one of domain?
the spouses is deriving income, only such spouse A. The consent of the owner of the private property to
shall be allowed the personal exemption. sell the same to the government.
B. In the case of married individuals, the addition B. The payment of just compensation.
exemptions may be claimed by only one of the C. The observance of due process in taking of the
spouses. private property.
C. As a rule, the husband shall be deemed to be the D. The existence of public use for the taking of a
head of the family and proper claimant of the private property.
additional exemption. 49. Which statement is wrong?
D. In the case of legally separated spouses, additional A. The power of taxation maybe exercised by the
exemption may be claimed by the spouses who has government, its political subdivisions, and public
custody of the children but shall not exceed four for utilities.
each spouse. B. Generally, there is no limit on the amount of tax
43. Which of the following statements is not correct? that may be imposed.
A. If only one spouse is deriving taxable income, only C. The money contributed as tax becomes part of the
said spouse may claim the additional exemption. public fund.
B. If both spouses earn taxable income only one of the D. The power to tax is subject to certain constitutional
spouses can claim additional exemption. limitations.
C. If legally separated from the spouse, the husband 50. Income from dealings in property (real, personal, and
can claim the additional exemption unless he waives mixed) is the gain or loss derived:
the right in favor of his wife. A. Only from the cash sales of property.
B. From cash and gratuitous receipts of property.
C. From sale and lease of property.
 D. Only from the sale of property. SITUATIONAL ANALYSIS:

TRUE OR FALSE: 61. After 10 years of romantic relationship, Gardo decided to

end his relationship with Tecla which made the latter
For items 51 through 60:
very angry. Tecla with anger in her eyes, boxed, kicked
Shade A if statement 1 is true and statement 2 is false. and berated Gardo. Gardo tried to pacify Tecla, but Tecla
Shade B if statement 1 is false and statement 2 is true. slipped, lost control and fell to the ground requiring
Shade C if both statements are true. hospitalization. To buy peace, Gardo decided to shoulder
Shade D if both statements are false. medical expenses for the injuries suffered by Tecla. The
amount is:
A. Taxable income of Tecla.
51. I. an expense which is necessary but not ordinary, or
B. Deductible expense of Gardo.
ordinary but not necessary is deductible from gross
C. Subject to final tax.
income. F
D. Exempt from income tax.
II. The taxpayer must signify his intention to elect the
62. At the testimonial dinner for new CPA’s, Ador, a
itemized deduction, otherwise he is deemed to have
reviewer was requested to sing the theme song of the
chosen the optional standard deduction. F
movie “Ghost”. Bruno, a new CPA, was so delighted that
52. I. The cost of leasehold improvements shall be
he felt he was falling in love with Ador so he decided to
deductible by the lessee by spreading the cost of the
cancel Ador’s indebtedness to him. As a result:
improvements over the life of the improvements or the
A. Ador realized a taxable income as compensation for
remaining lease term of the lease whichever period is
services.
shorter. T
B. If Ador accepts the cancellation, he will pay donor’s
II. Contributions by the employer to a pension trust for
tax.
past service cost is deductible in full in the year that the
C. Ador received a gift from Bruno and therefore is not
employer made the contributions. F
part of his taxable income.
53. I. The term “chief support” means more than one-half of
D. The amount of indebtedness cancelled is partly
the requirements for support. T
taxable, partly exempt.
II. If two single individuals contribute equal amounts for
63. Zoe took out a life insurance policy of P1,000,000
the support of a dependent, neither one of them may
naming his wife as beneficiary. The policy provides that
qualify as head of the family. T the insurance company will pay Zoe and his beneficiary
54. I. In case of married individuals, the basic and additional the amount of P1,000,000 after the 25 th year of the
exemptions shall be claimed by only one of the spouses. policy, should he die before this date. The premiums
F paid on the policy are P700,000. If Zoe outlived the
II. If the dependent child marries during the taxable year, policy and received the proceeds of P1,000,000, such
the taxpayer may still claim the same exemption as if the proceeds will be:
marriage occurred at the close of such year. T A. Taxable in full.
55. I. A gain from sale of shares of a domestic corporation B. Partly taxable, partly exempt.
shall be considered derived from the Philippines C. Subject to final tax.
regardless of where the shares were sold. T D. Exempt from income tax.
64. Using the preceding number, if Zoe dies and his
II. A gain from sale of shares of a foreign corporation
beneficiary received the proceeds of P1,000,000, such
shall be considered derived from the country where the
proceeds will be:
corporation was created or organized. F A. Taxable in full.
56. I. Interest paid on preferred stock is deductible from the B. Partly taxable, partly exempt.
gross income of the paying corporation. F C. Subject to final tax.
II. A capital expenditure usually benefits more than one D. Exempt from income tax.
accounting period and is deductible from the gross 65. Zara, a dedicated and honest employee of Majubis Corp.
income in the year it is paid or incurred. F for the past 20 years was advised that she is to be
57. I. In case of a married taxpayer, only the spouse claiming retrenched as the company was losing heavily but that
the additional exemptions for dependents shall be she would be given the separation pay provided by law.
entitled to the deduction on premium payments on To avoid implication of inefficiency, Zara was advised to
health and/or hospitalization insurance. T file a letter of resignation instead of being retrenched. If
II. The deduction for premium payments on health Zara files a letter of resignation and receives the
separation pay, such amount is:
and/or hospitalization insurance shall not exceed P2,400
A. Taxable in full.
per year for the family or P200 per month. T
B. Partly taxable, partly exempt.
58. I. If the taxpayer should have additional dependent C. Exempt from income tax.
children during the taxable year, he can always claim the D. Subject to final tax.
additional exemptions for such year. F 66. Using the preceding number, if Zara is retrenched and
II. A non-resident alien is taxable on all income derived receives the separation pay, such amount is:
from sources within the Philippines. T A. Taxable in full.
59. I. Housing privileges of the Armed Forces of the B. Partly taxable, partly exempt.
Philippines are taxable fringe benefits. F C. Exempt from income tax.
II. Cost of premiums borne by the employer for the D. Subject to final tax.
group insurance of his employees is a taxable fringe 67. A building was partially destroyed by fire in 2009. The
benefit. F building had a book value of P5,000,000. The insurance
60. I. Fringe benefits may be given to managerial, company was willing to pay P4,000,000, which was
supervisory and rank and file employees. T refused by the owner. Finally, the claim was settled in
II. Cost of economy and business class airplane ticket for 2011 for P4,600,000. The proceeds will be:
A. Exempt from income tax.
foreign travel is a taxable fringe benefit. F
B. Part of taxable income.
 C. Subject to final tax. Which of the above contributions is qualified as
D. Partly exempt, partly taxable. deductions from the gross compensation income of
68. Eme Corporation secured an income tax holiday for 5 Walang-awa if he is a newly retired government official
years as a pioneer industry. On the fourth year of the tax who is not engaged in business?
holiday, Eme Corporation declared and paid cash A. Only the P500,000
dividends to its stockholders, all of whom are individuals. B. The P500,000 and the P10,000
Are the dividends taxable? C. The P500,000, P10,000, and the P15,000
A. The dividends are taxable: the tax exemption of Eme D. None of them
Corporation does not extend to its stockholders. 73. Using the same data above, which of the following
B. The dividends are tax-exempt because of Eme contributions is/are qualified as deduction to Walang-
Corporation’s income tax holiday. awa if he is engaged in business?
C. The dividends are taxable if they exceed 50% of Eme A. Only the P500,000
Corporation’s retained earnings. B. The P500,000 and the P10,000
D. The dividends are exempt if paid before the end of C. The P500,000, P10,000, and the P15,000
Eme Corporation’s fiscal year. D. None of them
69. Witchikels Corporation purchased a residential house 74. The President of the Philippines and the Prime Minister
and lot with a swimming pool in an upscale subdivision of Japan entered into an executive agreement in respect
and required the company president to stay there of a loan facility to the Philippines from Japan whereby it
without paying rent; it reasoned out that the company was stipulated that interest on loans granted by private
president must maintain a certain image and be able to Japanese financial institutions in the Philippines shall not
entertain guests at the house to promote the company’s be subject to Philippines income taxes. What basic
business. The company president declared that because characteristic of taxation has been violated by this
they are childless, he and his wife could very well live in agreement?
a smaller house. Was there a taxable fringe benefit? A. Inherent limitation
A. There is no taxable fringe benefit because the B. Theoretical justice
company president was only required to stay there C. Legislative in character
and did not demand free housing. D. Administrative feasibility
B. There was no taxable fringe benefit since it was for 75. After having been informed that some massage parlors
the convenience of the employer and was necessary are being used as fronts for prostitution, the
for its business. Sangguniang Panlungsod of Manila passed a tax
C. There was a taxable fringe benefit because the ordinance subjecting massage parlors within its
house was very luxurious. jurisdiction to such onerous taxes that leave them no
D. There was a taxable fringe benefit since the stay at other alternative but to stop operating. The passage of
the house was for free. the ordinance is a valid exercise of:
70. Bank A deposited money to Bank B which earns interest A. Taxation.
that is subjected to the 20% final withholding tax. At the B. Eminent Domain.
same time, Bank A is subjected to the 5% gross receipts C. Police Power.
tax on its interest income on loan transactions. Which D. Police Power and Power of Taxation.
statement below incorrectly describes the transactions?
A. There is no double taxation because the first is PROBLEM SOLVING:
income tax while the second is business tax.
B. There is double taxation because two taxes – 76-78. The following data belong to Zion Corp. for the year 2015:
income tax and gross receipts tax are imposed on Educational assistance to supervisors and their P100,000
the interest incomes described above, and double children
taxation is prohibited under the 1987 Constitution. Employer’s contribution for the benefit of the 80,000
C. Income tax on interest income of deposits of Bank A employees to retirement, insurance, and
is a direct tax while GRT on interest income on loan hospitalization benefit plan
transaction is an indirect tax. Year’s rental for an apartment paid by the 120,000
D. There is no double taxation because the income tax corporation for the use of its comptroller
is on the interest income on Bank A on its deposits
with Bank B (passive income) while the gross The fringe benefits tax due is:
receipts tax is on the interest income received by A. P75,294 B. P103,529
Bank A from loans to its debtor – customers (active C. P141,176 D. P112,941
income).
71. An individual, who is a real estate dealer, sold a 79-81. Zady Corp., a regional operating headquarters of a
residential lot in Quezon City at a gain of P100,000 multinational company in the Philippines provided its employees
(selling price of P900,000 and cost of P800,000). The sale with cash and non-cash fringe benefits in 2015 as follows:
is subject to income tax as follows: Total amount of fringe benefits P1,000,000
A. 6% capital gains tax on the gain. 60% of said amount was given to rank and file employees
B. 6% capital gains tax on the gross selling price or fair 40% of said amount was given to corporate officers as follows:
market value, whichever is higher.
 To resident citizens (taxed at regular 45%
C. Ordinary income tax at the graduated rates or 5% to
rates)
32% of net taxable income.
 To non-resident aliens not engaged in 35%
D. 30% income tax on net taxable income.
trade or business in the Philippines
72. The Cancer Hospital of the Philippines is a charitable
institution. Mr. Walang-awa visited the hospital on his  To special alien and Filipino employees 20%
60th birthday. He donated P500,000 to the hospital and
P10,000 to a cancer victim who is only ten (10) years old. The fringe benefits tax due is:
He also brought with him a chain restaurant mascot that A. P60,704 B. P145,491
played with the children patients while eating the C. P84,706 D. P188,235
popular product of the restaurant. It had cost him
P15,000. For items 82 through 87:
The following relate to the compensation income of a private Contribution expense 80,000
rank and file employee during 2016: Pension contribution 50,000
Annual compensation income P540,000 Provision for bad debts 15,000
13th month pay 45,000 Entertainment expense 10,000
14th month pay 45,000 Office supplies 12,000
Total of monthly rice allowances during the 20,000 Loss on sale of patent 40,000
year Total P 447,000
Commission from the employer 12,000 Net income P 223,000
Christmas gift 8,000
Half of the contribution to pension is funding of prior service cost.
82-84. Compute the total non-taxable compensation income There was a write-off of receivables totaling P12,000 during the
including exempt de minimis benefits. year. The contribution was made to an accredited civic
A. P0 B. P23,000 organization.
C. P53,000 D. P105,000
94-96. What is the total regular allowable itemized deductions?
85-87. Compute the gross taxable compensation income. A. P369,900 B. P371,100
A. P670,000 B. P565,000 C. P317,910 D. P354,600
C. P617,000 D. P647,000
97-99. Compute the taxable income before OSD assuming the
88-90. The following relate to the net income of the audit firm of taxpayer is a corporation using OSD.
Mr. Zeus, a single taxpayer with two dependent children: A. P620,000 B. P520,000
Professional Fees P500,000 C. P550,000 D. P570,000
Long-term capital gain 80,000
Short-term capital gain 45,000 100-102. Compute the total deductions assuming the taxpayer is
Ordinary gain 20,000 a corporation using OSD.
Long-term capital loss ( 90,000) A. P220,000 B. P228,000
Short-term capital loss ( 30,000) C. P248,000 D. P208,000
Ordinary loss ( 40,000)
Other business expenses ( 200,000) For items 103 through 114:
Net income P285,000
Mr. Pedro is a managerial employee at Lafang International. He is
Compute his taxable income. paid the following benefits during the year:
A. P290,000 B. P210,000 Salaries, net of P8,000 PhilHealth, P12,000 SSS, P970,000
C. P190,000 D. P235,000 and P4,000 HDMF and P10,000 withholding tax
Fixed allowance 40,000
91-93. Shown below is the summarized result of operations of 13th month pay and other benefits 98,000
Ms. Zia’s business: Fringe benefits (residential rentals) 102,000
Sales P700,000
Cost of Sales 300,000 Mr. Pedro has a senior citizen mother and a disable godson who
Gross profit P400,000 are dependent upon him for chief support.
Capital gain on the sale of land 100,000
Total gross income P500,000 103-105. Compute the taxable compensation income.
Other deductible expenses 100,000 A. P1,036,000 B. P936,000
Contributions expenses: C. P961,000 D. P986,000
 Government priority project 50,000
106-108. Compute the fringe benefit tax.
 Non-accredited, non-profit 45,000
institution A. P0 B. P72,000
C. P48,000 D. P24,000
 Foreign foundation 25,000
Net income P280,000
109-111. Assuming Lafang International is a regional operating
headquarters of a multinational corporation; compute Mr.
Compute his taxable income.
Pedro’s income tax on compensation.
A. P230,000 B. P270,000
A. P155,400 B. P259,000
C. P255,000 D. P170,000
C. P117,000 D. Indeterminable
For items 94 through 102:
112-114. Using the same facts in the immediately preceding
numbers, compute the fringe benefits tax.
The following relates to a taxpayer:
A. P17,000 B. P9,000
Sales P1,000,000
C. P34,000 D. P18,000
Less: Cost of Sales 450,000
Gross income from operations P 550,000
For items 115 through 120:
Add: Non-operating income
Dividend income – domestic 50,000
The Finale Corporation had the following historical MCIT and RCIT
Interest income – bank 20,000
data:
Gain on sale of domestic stocks 30,000
Year MCIT RCIT
Gain on sale of office equipment 20,000
2013 P120,000 P110,000
Total gross income P 670,000
2014 200,000 220,000
Less: Expenses
2015 190,000 0
Interest expense 40,000
2016 170,000 180,000
Salaries expense 150,000
Depreciation expense 50,000
115-117. Basing solely on the information provided, what is the
tax due and payable in 2013 and 2014, respectively?
A. P120,000; P220,000 B. P120,000; P100,000
C. P120,000; P210,000 D. P110,000; P220,000

118-120. In the immediately preceding problem, what is the tax

due and payable in 2015 and 2016, respectively?
A. P190,000; P0 B. P190,000; P180,000
C. P0; P0 D. P170,000; P0

END OF EXAMINATION

“EVERY WEAKNESS YOU HAVE IS AN OPPORTUNITY FOR GOD TO

SHOW TO SHOW HIS STRENGTH IN YOUR LIFE.”

Prepared by:

FRANCESCO RAFIEL A. MALLARI, CPA

FACULTY, Department of Accountancy
OLFU – Pampanga

Reviewed and Checked by:

ALEND KERSEY Q. SAMPANG, CPA

OIC – Department of Accountancy
OLFU – Pampanga

Approved by:

Dr. IGNACIO C. CORDOVA, Jr.

Dean – College of Business and Accountancy
OLFU