0% found this document useful (0 votes)
111 views6 pages

Midterm Exam For Print

The document is a midterm examination for the Income Taxation course at Pagadian Capitol College, consisting of multiple-choice questions covering various aspects of corporate taxation in the Philippines. It includes questions on the taxability of foreign and domestic corporations, income types subject to final tax, and specific tax computations for corporations. Additionally, it addresses concepts related to minimum corporate income tax and the classification of income for tax purposes.

Uploaded by

gosammy624
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
111 views6 pages

Midterm Exam For Print

The document is a midterm examination for the Income Taxation course at Pagadian Capitol College, consisting of multiple-choice questions covering various aspects of corporate taxation in the Philippines. It includes questions on the taxability of foreign and domestic corporations, income types subject to final tax, and specific tax computations for corporations. Additionally, it addresses concepts related to minimum corporate income tax and the classification of income for tax purposes.

Uploaded by

gosammy624
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 6

PAGADIAN CAPITOL COLLEGE, INC.

COLLEGE OF BUSINESS EDUCATION


INCOME TAXATION
MIDTERM EXAMINATION

Name: __________________________________________ Course & Year: _____________ Date: ___________

Instructor: __________________________________________ Class Schedule: _________________

Instruction: Choose the correct answer and write it before the number.

1. Which is the correct statement?


a. A foreign corporation is taxable on income derived from sources within and without the Philippines.
b. A foreign corporation is taxable on income derived from sources within the Philippines only
c. A domestic corporation is taxable on income derived from sources within the Philippines only.
d. A domestic corporation is taxable on income derived from sources without the Philippines only.

2. DEF, a corporation registered in Germany, operates a 1,000-ton steel milling plant in Quezon province. Which among the
following shall be taxable under the Tax Code?
a. Its income from a steel-forging plant located in the Netherlands
b. Its gain from the sale of its non-operational smelting plant in Indonesia.
c. Royalties from the use in the Philippines of its proprietary software which was developed and patented in Germany.
d. Interest income from a Euro deposit with a French bank in Paris.
e. None of the above.

3. ABC Inc., a corporation registered and holding office in Australia, not operating in the Philippines, may be subject to
Philippine income taxation on
a. Gains it derived from sale in Australia of an ore crusher it bought from the Philippines with the proceeds converted to
pesos.
b. Gains it derived from sale in Australia of shares of stock of Philex Mining Corporation, a Philippine corporation.
c. Dividends earned from investment in a foreign corporation that derived 40% of its gross income from Philippine
sources.
d. Interest derived from its dollar deposits in a Philippine bank under the Expanded Foreign Currency Deposit System.

4. Which of the following statements is not correct?


a. MCIT is not applicable to resident foreign corporations.
b. The corporate quarterly return shall be filed within 60 days following the close of each of the first three quarters of
the taxable year.
c. An RFC is taxed on a net income basis on its ordinary income earned from within the Philippines only.
d. A NRFC is taxed on a gross income basis on its income earned from within the Philippines only.

5. The following income are subject to final tax, except


a. Royalty income received by a domestic corporation from a domestic corporation.
b. Cash dividends received by a non-resident foreign corporation from a domestic corporation
c. Cash dividends received by a domestic corporation from a domestic corporation.
d. Interest income from a Peso deposit received by an RFC from a Philippine bank.
e. Branch profit remitted by a branch to the head office of a resident foreign corporation.

6. Beginning July 1, 2020, the RCIT rate for domestic corporations shall be 25%. However, a lower RCIT rate of 20% shall be
imposed if the following conditions is/are present:
a. The domestic corporation’s net taxable income is not more than ₱5.0 Million
b. The domestic corporation’s net assets (excluding the land on which its office, plant, or equipment are situated) are
not more than ₱100 Million.
c. All of the above.
d. None of the above.

PROBLEM 7-9
Panalo Corporation had the following data for calendar year 2022 (MCIT – 1%), its 5th year of operations:

Gross sales, Philippines ₱ 7,900,000


Gross sales, US 5,050,000
Cost of sales, Philippines 3,250,000
Cost of sales, US 2,300,000
Allowable deductions, Philippines 1,300,000
Allowable deductions, US 6,100,000
Non-operating income, Philippines 50,000

The corporation’s latest audited financial statements include the following accounts:
Land, Philippines ₱ 50,000,000
Building, Philippines 25,000,000
Total Assets 180,000,000

7. Compute the income tax due if the taxpayer is a domestic corporation:


a. ₱ 74,500
b. ₱ 975,000
c. ₱1,175,000
d. None of the above

8. Compute the income tax due if the taxpayer is a foreign corporation with a branch in the Philippines (RFC).
a. ₱ 500,000
b. ₱ 850,000
c. ₱ 175,000
d. None of the above

9. Compute the income tax if the taxpayer is a foreign corporation with no branch or office in the Philippines (NRFC).
a. ₱1,700,000
b. ₱1,975,000
c. ₱1,175,000
d. None of the above

PROBLEM 10-11
The records of Jester Corporation, domestic, organized in 2014, engaged in retail, show the following in calendar years 2021,
2022, 2023:
2021 2022 2023
Sales, gross of CWT 1,800,000 1,740,000 2,100,200
Cost of Sales 430,000 110,000 510,100
Operating Expenses 1,740,200 1,600,000 1,300,400
Non-operating income 400,000 70,000 230,000
CWT on sales per BIR Form 2307 18,000 7,400 21,002
Taxes paid in previous 3 quarters 5,500 1,250 31,900
MCIT Rate 1% 1% 1.5%

The corporation chooses to credit in future years any excess tax credits it may have in a taxable year.

10. Compute the tax payable in its 2021 Annual ITR.


a. ₱5,800
b. ₱17,400
c. ₱0
d. None of the above

11. What would be the tax payable of Jester Corporation for taxable years 2022?
a. ₱300
b. ₱6,440
c. ₱30,500
d. ₱0

12. Any income from transactions with depository banks under the expanded foreign currency deposit system shall be exempt
from income tax if derived by a
a. Domestic corporation
b. Resident foreign corporation
c. Non-resident foreign corporation
d. Resident alien

PROBLEM 13-14
GILI Inc., a domestic corporation, had the following financial information for CY 2022:
Gross income, Philippines 3,895,000
Gross income, abroad 1,300,000
Business expenses, Philippines 878,000
Business expenses, abroad 340,000
Dividend income from a domestic corporation 40,000
Dividend income from a foreign corporation* 30,000
Interest income, BPI Manila 50,000
Interest income, Citibank New York 25,000
Interest income, BPI FCDU 34,000
Royalty income (Phils.), copyright (book) 450,000
Royalty income (Phils.), patent 1,350,000
Raffle draw winnings 60,000

*Note: 2/3 of the foreign corporation’s income in the last 3 years was earned in the Philippines.

13. What is the total amount of final taxes to be withheld from GILI’s income in 2022?
a. ₱375,100
b. ₱346,100
c. ₱379,600
d. None of the above
14. Compute GILI’s income tax payable in its Annual ITR for CY 2022.
a. ₱1,023,000
b. ₱623,650
c. ₱813,250
d. None of the above

15. As a rule, this is not part of taxable income


a. Profit sharing
b. Hazard pay
c. Overtime pay
d. 13th month pay

16. Which of the following is part of gross income in the ITR?


a. PCSO and Philippine Lotto winnings
b. Bank interest on long term deposit
c. Proceeds of life insurance upon death of the insured
d. Raffle prize not exceeding P10,000

17. This is not part of gross compensation income


a. Salary of P10,000 a month of an employee
b. Fringe benefits of P10,000 a month
c. Salary of P10,000 a month of a partner in a general professional partnership
d. Honorarium and allowances of P10,000 of a member of the board of directors of a corporation who is also an
employee of the corporation.

18. The records of ABC Corporation, organized in 2007 showed the following data for 2024.
Gross Income P2,000,000
Less: Allowable business expenses
(other than bad debts) P1,850,000
Bad debts written off 100,000 1,950,000
Taxable net income P 50,000

The income tax due in 2024 is


a. P40,000
b. P45,000
c. P12,500
d. P25,000

19. Which of the following is a requisite for an income to be taxable?


a. There must be gain
b. The gain must be realized or received
c. The gain must not be excluded by law from taxation
d. All of the above

20. Which of the following test of source of income is incorrect?


a. Interest income – residence of the debtor
b. Income from services – place of performance
c. Royalties – place of use of intangible
d. Gain on sale of real property – place of sale

21. Dividends paid by a domestic corporation maybe taxable but subject to final tax, except
a. If received by a resident citizen
b. If received by a non-resident corporation
c. If received by a resident alien
d. If received by another domestic corporation

22. Chan, Chinese national, arrived in the Philippines on January 1, 2012 to visit his Filipina paramour. He planned to stay in
the country until December 31, 2016, by which time he would go back to his legal wife and family in China. Chan derived
income during his stay here in the Philippines. For the taxable year 2012, Chan shall be classified as a:
a. Resident alien
b. Non-resident alien engaged in trade or business in the Philippines
c. Non-resident alien not engaged in trade or business in the Philippines
d. Special alien employee

23. Passive income includes income derived from an activity in which the earner does not have any substantial participation.
This type of income is
a. Usually subject to a final tax.
b. Exempt from income taxation.
c. Taxable only if earned by a citizen.
d. Included in the income tax return.

24. Which of the following items is not part of gross income to be reported in the income tax return?
a. Increase in value of land
b. Gambling winnings
c. Prize of P10,000
d. Gain from sale of store’s air conditioner

25. In case of ambiguity, tax laws shall be interpreted:


a. Strictly against the taxpayer.
b. Liberally against the government.
c. Liberally in favor of the taxpayer.
d. Liberally in favor of the government.

26. Which of the following statements is not correct?


a. Taxes may be imposed to raise revenue or to provide incentives or disincentives for certain activities within the state.
b. The state can have the power of taxation even if the constitution does not expressly give it the power to tax.
c. For the exercise of the power of taxation, the state can tax anything at any time.
d. The provisions of taxation in the Philippine Constitution are grants of power and not limitation on the taxing power.

27. A domestic corporation, in its fifth (5th) year of operations, had the following data for the year:
 Net sales 2,000,000
 Capital gain on direct sale to a buyer of shares of a
domestic corporation for P500,000 200,000
 Capital gain on sale thru a real estate broker of
land and building outside the Philippines for P5,000,000 1,000,000
 Dividend from a domestic corporation 50,000
 Interest on bank deposit 40,000
 Cost of sales 600,000
 Quarterly corporate income tax paid 190,000
 Operating expenses 500,000

The income tax payable upon filing of the annual income tax return is:
a. 475,000
b. 285,000
c. 380,000
d. 190,000

28. In which of the following cases will the dividend income from a foreign corporation be classified as “income without”
a. Less than 50% of the foreign company’s gross income for the preceding three (3) years prior to the dividend
declaration was derived from sources within the Philippines.
b. 50% of the foreign company’s gross income for the preceding three (3) years prior to the dividend declaration was
derived from sources within the Philippines.
c. More than 50% of the foreign company’s gross income for the preceding three (3) years prior to the dividend
declaration was derived from sources within the Philippines.
d. Always classified as income without”.

29. The minimum corporate income tax does not apply to a corporation, if
a. Imposition was suspended by the Secretary of Finance due to a corporations’ heavy losses arising from prolonged
labor dispute;
b. Corporation is in its initial year of operation
c. Corporation is exempt from income tax by virtue of tax holidays granted to it by the Board of Investment;
d. All of the above

30. Which of the following statements is correct?


 The term “domestic”, when applied to a corporation, means created or organized in the Philippines or under the laws
of a foreign country as long as it maintains a Philippine branch.
 A corporation which is not domestic may be a resident (engaged in business in the Philippines) or nonresident
corporation (not engaged in business in the Philippines).
 Resident foreign corporations are subject to income tax based on net income from sources within the Philippines.

a. I only
b. II only
c. II and III
d. I, II, III

31. X took a life insurance policy of P5 million where the monthly premium is P10, 000. The proceeds will be paid to X after 25
years to the X’s estate should X die before completing the equivalent of 25 years payment. If the X outlived the policy,
which of the following is correct?
a. The proceeds will be part of X’s gross estate.
b. The proceeds will be part of X’s taxable income.
c. The proceeds will be party taxable estate and partly exempt.
d. The proceeds will be party taxable income and partly exempt.

32. Sale of real property is subject to:


S1 – capital gains tax if property is classified as a capital asset.
S2 – creditable withholding tax if property is classified as ordinary asset.

Which is TRUE?
a. Only S1
b. Only S2
c. Both are true
d. Both are false

33. Which of the following statements is correct?


 A minimum corporate income tax (MCIT) of 1% of gross income from July 1, 2020 to June 30, 2023 and 2% beginning
July 1, 2023 is imposed upon any domestic corporation and resident foreign corporation beginning on the 4th taxable
year immediately following the taxable year in which such corporation commenced its business operations.
 MCIT shall be imposed whenever such corporation has zero or negative taxable income, or when the amount of MCIT
is greater than normal income tax due from such corporation.
 The computation and the payment of MCIT, shall likewise apply at the time of filling the quarterly corporate income
tax.

a. I and II only
b. II and III only
c. I, II, III
d. None of the above

34. The following entities shall be exempt from corporate income taxes because of their exclusion from the definition of
“corporation” for income tax purposes:
a. Business partnerships, domestic corporations
b. One-person corporations, foreign corporations
c. General professional partnerships, licensed JVs in the construction business
d. All of the above

35. Pedro, single received the following during the taxable year:
 Proceeds of his life insurance paid at an annual premium
of 15,000 within 25 years 2,000,000
 Proceeds of his mother’s life insurance paid at an annual
Premium of 10,000 within 20 years 1,000,000
 House and lot inherited from his mother 4,000,000
 Rent income from inherited properties 200,000

For income tax purposes, how much of the above items must be included in his gross income?

a. 7,200,000
b. 1,625,000
c. 200,000
d. 1,825,000

36. Kris Inc. sold vacant lot to Moca Corporation for 10,000,000 which it acquired at a cost of 5,000,000. The fair market value
of the said property per tax declaration is 12,000,000, while its zonal value is 15,000,000. How much is the income tax
applicable on the transaction?
a. 600,000
b. 720,000
c. 900,000
d. 1,500,000

37. A domestic corporation had the following data on income and expenses during the year 2022:
Gross Income, Phil. 10,000,000
Business Expense, Phil. 2,000,000
Gross Income, China 5,000,000
Business Income, China 1,500,000
Interest Income, Metrobank, Phil. 300,000
Interest Income, Shanghai Bank, China 100,000
Rent Income 200,000

How much was the income tax payable using RCIT?


a. 3,540,000
b. 3,530,000
c. 2,950,000
d. 2,480,000

38. A domestic corporation, already on its 3rd year of operation as of 2022 (MCIT – 1%), has the following data:

2021 2022
Sales 1,700,000 2,300,000
Cost of Sales 1,050,000 1,425,000
Operating Expenses 675,000 480,000.

The income tax payable in 2022.


a. 98,750
b. 92,500
c. 92,250
d. 86,000

PROBLEM 39-40
Angel Mae Corporation, a domestic corporation, had the following selected data for his first 5 years in operation:
YEAR GROSS INCOME EXPENSES RCIT MCIT
2016 1,000,000 1,200,000 30% 2%
2017 2,000,000 1,900,000 30% 2%
2018 3,000,000 2,950,000 30% 2%
2019 1,000,000 1,100,000 30% 2%
2020 980,000 500,000

39. The income tax payable in 2018.


a. 60,000
b. 15,000
c. 50,000
d. 0

40. The taxable income in 2020 was:


a. 380,000
b. 0
c. 100,000
d. 50,000

PROBLEM 41-45
Cabasag Corporation has the following information for the current year taxable year:
QUARTER RCIT MCIT CWT
First 200,000 160,000 40,000
Second 240,000 500,000 60,000
Third 500,000 150,000 80,000
Fourth 300,000 200,000 70,000
Additional Information:
 MCIT carry-over from prior year amounts of 60,000;

41. How much was the income tax payable for the first quarter?
a. 200,000
b. 160,000
c. 120,000
d. 100,000

42. How much as the income tax payable for the second quarter?
a. 660,000
b. 460,000
c. 200,000
d. 160,000

43. How much as the income tax payable for the third quarter?
a. 860,000
b. 120,000
c. 600,000
d. 140,000

44. How much as the annual income tax payable?


a. 1,260,000
b. 390,000
c. 230,000
d. 930,000

45. Using the same data in the preceding problem except that the MCIT on the 4 th Quarter is 500,000, how much was the
annual income tax payable?
a. 330,000
b. 1,310,000
c. 380,000
d. 360,000

You might also like