Business and Transfer Tax

Midterm Quiz 1 (Valued Added Tax)

MCQ: Choose the best answer (30 pts.)

1. Statement 1: A privilege store is not subject to VAT.

Statement 2: Buyer is statutorily liable for the payment of VAT?

a. Only statement 1 is true.

b. Only statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

2. In order to be subject to the requirement of VAT registration, a business must have:

a. Gross sales or receipts exceeding P3M.
b. Gross sales or receipts of at least P3M.
c. Gross sales or receipts other than those that are exempt under section 109, exceeding
P 3M.
d. Gross sales or receipts, other than those that are exempt under section 109, of at least P
3,000,000.

3. The VAT on importation is paid:

a. The non-resident seller monthly
b. The resident buyer monthly
c. The nonresident seller before release of goods from customs custody
d. The resident buyer before release of goods from customs custody.

4. Statement 1: Incidental and isolated transactions may be subject to VAT.

Statement 2: Radio or television franchisees is barred from cancelling its optional VAT
registration.
a. Only statement 1 is true.
b. Only statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

5. Statement 1: In case of barter, sale or exchange of real property, gross selling price means fair
market value or consideration, whichever is higher.
Statement 2: Gross selling price is the appropriate VAT base for sale of services. receipts
a. Only statement 1 is true.
b. Only statement 2 is true.
c. Both statements are true.
d. Both statements are not true.
6. Maria and Clara entered into a contract of sale of car. Negotiations were made on March 1,
2021. They were able to agree on the price via text message on April 1, 2021. They signed the
contract on May 1, 2021, and constructive delivery on the car was made a week after on May 8,
2021. When shall VAT be recognized from the transaction?
a. March 1, 2021
b. April 1, 2021
c. May 1, 2021
d. May 8, 2021

7. Statement 1: Gross receipts of a PRC-licensed doctor is not subject to VAT on professionals.

Statement 2: In order to be zero rated, the sale and actual shipment of goods from the
Philippines to a foreign country must be paid for in Philippines pesos.
a. Only statement 1 is true.
b. Only statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

8. Sale of which of the following products is not exempt from VAT?

a. Shrimp
b. Cactus
c. Raisins
d. Bananas

9. Which of the following products will not allow the manufacturer to claim presumptive input
VAT?
a. Sardines
b. Cooking oil
c. Milk
d. Coffee

10. Which of the following sale is exempted from output VAT?

a. Sale of commercial lot at a price of P 1,000,000.
b. Sale of industrial lot at a price of P 500,000.
c. Sale of residential lot at a price of P 1,500,000.
d. None of the above.
 11. Chris is engaged in the sale of chicken in various forms. The following are his sales:
Live chickens P 8,510,000 exempt
Fighting cocks 300,000 VAT
Fresh chicken meat 210,000 exempt
Cut chicken meat 7,700,000 exempt
Boiled chicken meat 2,220,000 exempt
Roasted chicken meat 510,000 exempt
Smoked chicken meat 5,310,000 exempt
Salted chicken meat 4,640,000 exempt
Chicken nuggets 2,130,000 VAT
Chicken cubes 4,970,000 VAT
Chicken hotdog 4,500,000 VAT
Total P 41,000,000
How much are the VAT exempt sales?

Solution:
*add all the exempt

8,510,000
210,000
7,700,000
2,220,000
510,000
5,310,000
4,640,000
29,100,000

For questions 12 to 14:

Philippine Airlines is a domestic corporation engaged in the transport of cargo and passengers. The
following are the routes that PAL flew and the corresponding amounts it received for the rendering of
such services:

Route Amount___
Manila to Cebu P 2,300,000
Cebu to Manila 7,460,000
Manila to Davao 8,490,000
Davao to Manila 5,900,000
Manila to Seoul 6,060,000
Seoul to Manila 5,870,000
Manila to Tokyo 4,550,000
Tokyo to Manila 5,650,000
Total P 46,280,000
 12. How much are the zero rated sales?

Solution:
6,060,000
4,550,000
10,610,000

13. How much is the Philippine Airlines output VAT?

Solution:
2,300,000
7,460,000
8,490,000
5,900,000
24,150,000 × 12% = 2,898,000

14. How much is the VAT exempt?

Solution:
5,870,000
5,650,000
11,520,000

Chris University is a stock educational institution duly registered with the Department of Education and
Commission on Higher Education. During the quarter, it had the following receipts:

Amount
Tuition fees from students P 70,700,000
Lease payments by private concessionaires 7,450,000
Grants and donations from alumni 5,740,000
P 83,890,000

15. Compute for the output VAT of Chris University.

Solution:
7,450,000 × 12% = 894,000

16. One of the principles in business tax is the application of “Principle of Destination”. Which of
the following is not an application of the said principle?
a. Celine Dion who performed concert in the Philippines.
b. Export sales from the Philippines to Japan.
c. An international carrier carrying passengers from US to Philippines.
d. None of the choices.
 17. Mr. Chris an entrepreneur has various businesses. The following data pertain to his business
for the year 2019:
Sales from selling merchandise P 2,300,000
Receipts from restaurant 500,000
Receipts from practice of profession 200,000
Rental receipts – residential units with
monthly rental of P 5,000 *exempt 100,000

How much is the business tax of Mr. Chris?

Solution:
2,300,000
500,000
200,000
3,000,000 × 3% = 90,000

18. Mr. Chris, VAT registered, an exporter of furniture, imports woods from China worth P 5M.
Can Mr. Chris claim input tax on the said importation?
a. No, because he is engaged in export business.
b. Yes, being zero rated, he can claim input taxes.
c. No, because he is exempt from VAT.
d. Yes, because the worth of importation is more than P 3M.

19. Mr. Chris, a professor of National University imported a computer equipment from Japan for
his online teaching. The computer is worth P 30,000 (converted already), with custom duties
and other charges amounting to P 5,000. Is Mr. Chris liable to business tax and how much?
a. Zero, because he is not engaged in business.
b. P 4,200, though he is not engaged in business, he must still pay VAT.
35,000 × 12% = 4,200
c. P 3,600 VAT. Custom duties and other charges are not included in the computation.
d. Zero, he is exempt because he will use the computer for education purposes.

20. In year 2020, Mr. Chris, VAT registered made an importation of the following:
Medicines for diabetes 250,000
Fresh meat and vegetables 300,000
Flowers for his flower shop 100,000
Gadgets for his gadget shop 200,000

How much is the input tax from importation?

Solution:
100,000
200,000
300,000 × 12% = 36,000
 21. Nena, lessor of apartment in Bulacan leased her properties amounting to p 10,000 per
month. Her gross receipts for the quarter of the taxable year amount to P 775,000. What is
the applicable tax to be paid by Nena?
a. She is VAT exempt and income tax exempt.
b. She is subject to 3% OPT and income tax.
c. She is VAT exempt but subject to income tax.
d. She is subject to 3% OPT but not income tax.

22. In 2021, Mr. Chris purchased a residential house and lot from Empire East, a VAT registered
subdivision developer amounting to P 1,998,000. What is the tax liability of Chris and how
much?
a. VAT, 239,760
b. OPT, 59,940
c. Exempt, Zero
d. CGT, 119,880

23. Chris Company, VAT registered, had the following transactions for the year 2020:
Sale of meat products P 300,000
Sale of processed food P 500,000
Rentals – commercial P 200,000

Chris purchased computer amounting to P 22,400, gross of VAT, which will be used for the
entire business of Chris. How much is the input tax of Chris Company?

Solution:
700,000/1,000,000 × 2,4000 = 1,680

24. Nena, lessor of apartment in Bulacan leased her properties amounting to p 10,000 per
month. Her gross receipts for the quarter of the taxable year amount to P 775,000. What is
the applicable tax to be paid by Nena?
a. She is VAT exempt and income tax exempt.
b. She is subject to 3% OPT and income tax.
c. She is VAT exempt but subject to income tax.
d. She is subject to 3% OPT but not income tax.

25. ABC Corporation had the following sales for the 1st Quarter of 2020:
Export sales P 100,000
Domestic sales P 200,000
Transaction deemed sales P 50,000
VAT Exempt P 80,000

200,000
50,000
250,000 × 12% = 30,000 output tax
 Also, ABC had the following purchases from the VAT Supplier:
Export sales P 50,000
Domestic sales 30,000
Transaction deemed sales 20,000
VAT exempt 5,000

50,000
30,000
20,000
100,000 × 12% = 12,000 input tax

Deferred VAT last year, P10,000

All transactions are exclusive of VAT.

How much is the VAT Payable of ABC Corporation?

Solution:
Output Tax (30,000)
Input Tax (12,000)
Deferred VAT (10,000)
VAT Payable 8,000

26. ABC Associates, a VAT-registered firm, sold its office building together with the lot thereon to
DEF associates, another VAT-registered firm, for 60 million pesos. Of the total selling price, 40
million pesos pertains to the building. The useful life of the building is estimated to be 30
years. Assuming the buyer is paid in lump sum, how much output tax should be paid by the
seller in the month of sale?

Solution:

60,000,000 × 12% = 7,200,000

27. Based on the preceding number, how much input tax can be claimed by the buyer in the
month of purchase? Bonus
 28. Casa Leticia, VAT registered, is engaged in hotel business. It started operation in November
2018 and had the following selected information from its records for the month:
Service Revenue P 500,000
Unearned Revenue 20,000
Purchases from VAT registered entities:
Goods P 150,000 × 12% 18,000
Services (20% still unpaid) 200,000 (160,000 × 12%) 19,200
Importation of generator with
Useful life of 7 years
Dutiable value 1,200,000
Customs Duties 100,000
Excise Taxes 50,000
Other Charges within the BOC 50,000

How much VAT did the company remit to the BIR?

Solution:

1,200,000
100,000
50,000
50,000
1,400,000 × 12%/60months = 2,800

Service Revenue 500,000

Unearned Revenue 20,000
Collection 520,000 × 12% = 62,400 output tax

Collection 62,400
Goods 18,000
Services 19,200
VAT on Capital Goods 2,800
VAT Payable 22,400
 29. BOBA residences Inc. is a domestic corporation engaged in real estate business. It has the
following data for the last quarter of 2015:

Installment sale of a town house: Realized Gross Profit (GPR is 30%), P 300,000; Gross Selling
Price, P 4,000,000; Zonal Value, P 5,000,000
Deferred Sale of a parking lot: Gross selling price, P 1,000,000; FMV, P 1,500,000;
Rental Income, P 800,000
Rent Receivable, beg. P 300,000;
Rent Receivable, end P 100,000;

Importation on materials used in the construction, P 2,625,000

How much is the VAT due or payable?

Solution:
Zonal Value 5,000,000
Realize Gross Profit 300,000 RGP = Collection ×GPR
Collection 1,000,000

1,000,000/4,000,000 = 0.25 or 25%

VAT (5,000,000 × 12% = 600,000 × 25%) 150,000

Deferred Sale of Parking lot (1.5M × 12%) 180,000
Rentals (1,000,000 × 12%) 120,000
Output VAT 450,000
Input VAT (2,625,000 × 12%) 315,000
VAT Payable 135,000
 30. Rica Customers Inc. started its business operations paying percentage tax. Later, as its
business improves, it registered under the VAT system. The following information were taken
from its records on the last month as a non-VAT taxpayer:
Inventory, beginning:
Raw Materials P 250,000
Work in Process 540,000
Finished Goods 460,000
Supplies (20,000 pertains to fresh fruits
Given for free during lunchtime)70,000
Property, Plant and Eqt. 90,000
Intangible Assets 34,800

How much is the transitional input tax?

Solution:

Raw Materials 250,000

Work in Process 540,000
Finished Goods 460,000
1,250,000
Supplies (70,000 – 20,000) 50,000
Total 1,300,000
Transitional Input Tax (1,300,000 × 12%) 26,000