Income tax

Income tax

July 24, 2021

Multiple Choice

In 2020, Roy borrowed money from the bank amounting to1,000,00 at an annual rate 7%. He invested the money in deposit substitutes earning annual interest income of 8%.

How much is the deductible interest?

• 43,600

• 26,400

• 70,000

• 80,000

Multiple Choice

Mapanlinlang Corporation was assessed by the BIR due to underpayment of percentage taxes. The assessment notice disclosed the following:

Basic tax 1,000,000

Surcharge 250,000

Interest 200,000

Penalties 25,000

Total 1,475,000

How much the deductible taxes?

• 1,275,000

• 1,000,000

• 1,250,000

• NONE

Multiple Choice

A taxpayer engaged in farming incurred the following losses:

Loss on destruction of residence by a storm 1,200,000

Loss on sale of old farm equipment 50,000

Loss on assignment of receivables to a bank 40,000

Purchase cost of a bull lost during a storm 30,000

How much are the deducible losses?

• 40,000

• 80,000

• 90,000

• 60,000

Multiple Choice

Mr Ali Gator, a lending investor, loaned a corporation 1,000,000. After three taxable period, the corporation became bankrupt. The entire principal and accrued interest of 240,000 became worthless. Assume Mr. Gator is under accrual basis how much is the allowable deduction?

• 1,240,000

• 240,000

• 0

• 1,000,000

Multiple Choice

Don Juan set up an irrevocable trust by transferring a commercial building in favor of his doughters Ana and Karen. Don Pedro designated 10% of the rent income of the building to Ana for her studies while 20% shall be given to Karen for her family support. The building earned 2,000,000 rentals and reported 400,000 depreciation expense for the year.

How much can Ana claim as allowable deduction?

• 40,000

• 80,000

• 280,000

• NONE

Multiple Choice

Land containing natural resource was purchased for P110,950,000. It was estimated that the land, after exploration and exhaustion of its natural resource, will have a value of P950,000. It was estimated that the natural resources available for exhaustion as 5,000,000 tons. During 2018, 500,000 tons were extracted.

How much is the deduction for depletion for the year?

• 6,500,000

• 950,000

• 11,500,000

• 11,000,000

Multiple Choice

Mr. Estrella, a manufacturer of goods under the accrual basis opted to claim optional standard deduction. Aside from manufacturing, Mr. Estrella also leases a portion of his building to other businesses. The following relate to his income:

Gross recorded sales P 6,000,000

Sales returns, allowances, and discounts 400,000

Rental income 600,000

Interest income from bond investment 40,000

Interest income from customer`s note 150,000

Gain on sale of equipment 30,000

Dividend from domestic a corporation 20,000

Compute for the OSD of Mr, Estrella ?

• 2,500,000

• 2,540,000

• 2,000,000

• 3,000,000

Multiple Choice

Mr. Estrella, a manufacturer of goods under the accrual basis opted to claim optional standard deduction. Aside from manufacturing, Mr. Estrella also leases a portion of his building to other businesses. The following relate to his income:

Gross recorded sales P 6,000,000

Sales returns, allowances, and discounts 400,000

Rental income 600,000

Interest income from bond investment 40,000

Interest income from customer`s note 150,000

Gain on sale of equipment 30,000

Dividend from domestic a corporation 20,000

How much is the net income of Mr. Estrella?

• 3,800,000

• 3,000,000

• 3,880,000

• 3,080,000

Multiple Choice

The following relates to Mr. Kalix Martinez, an audit practitioner, and accredited service provider:

Compensation income, net of mandatory deductions 400,000

Billings for services rendered during the year:

Audit 5,000,000

Continuing professional education (CPE) seminars 300,000

Total 5,300,000

Collections during the year from:

Past year audit fee billings 600,000

Current year audit fee billings 4,000,000

CPE seminars 200,000

Interest on bank deposits 40,000

Sale of used equipment ( book value is 100,000) 180,000

Total 5,020,000

Compute for the OSD Assume the taxpayer is under ACCRUAL BASIS ?

• 2,020,000

• 2,000,000

• 2,120,000

• 2,100,000

Multiple Choice

The following relates to Mr. Kalix Martinez, an audit practitioner, and accredited service provider:

Compensation income, net of mandatory deductions 400,000

Billings for services rendered during the year:

Audit 5,000,000

Continuing professional education (CPE) seminars 300,000

Total 5,300,000

Collections during the year from:

Past year audit fee billings 600,000

Current year audit fee billings 4,000,000

CPE seminars 200,000

Interest on bank deposits 40,000

Sale of used equipment ( book value is 100,000) 180,000

Total 5,020,000

Compute for the taxable net income Assume the taxpayer is under ACCRUAL BASIS?

• 3,660,000

• 3,000,000

• 3,600,000

• 3,060,000

Multiple Choice

The following relates to Mr. Kalix Martinez, an audit practitioner, and accredited service provider:

Compensation income, net of mandatory deductions 400,000

Billings for services rendered during the year:

Audit 5,000,000

Continuing professional education (CPE) seminars 300,000

Total 5,300,000

Collections during the year from:

Past year audit fee billings 600,000

Current year audit fee billings 4,000,000

CPE seminars 200,000

Interest on bank deposits 40,000

Sale of used equipment ( book value is 100,000) 180,000

Total 5,020,000

Compute for the OSD Assume the taxpayer is under CASH BASIS?

• 1,920,000

• 1,000,000

• 1,900,000

• 2,000,000

Multiple Choice

The following relates to Mr. Kalix Martinez, an audit practitioner, and accredited service provider:

Compensation income, net of mandatory deductions 400,000

Billings for services rendered during the year:

Audit 5,000,000

Continuing professional education (CPE) seminars 300,000

Total 5,300,000

Collections during the year from:

Past year audit fee billings 600,000

Current year audit fee billings 4,000,000

CPE seminars 200,000

Interest on bank deposits 40,000

Sale of used equipment ( book value is 100,000) 180,000

Total 5,020,000

Compute for the taxable net income Assume the taxpayer is under CASH BASIS?

• 2,000,000

• 3,000,000

• 3,360,000

• 3,300,000

Multiple Choice

ABC Corporation, a taxpayer under the accrual basis of accounting, opted to claim optional standard deduction. The following data relates to the current year:

Gross sales, net of returns, allowances, and discounts 5,000,000

Interest income on time deposits 10,000

Gain on sale of building 40,000

Total Goods Available for sale 1.500,000

Ending Inventory 280,000

Determine the OSD?

• 1,000,000

• 1,508,000

• 1,500,000

• 1,528,000

Multiple Choice

ABC Corporation, a taxpayer under the accrual basis of accounting, opted to claim optional standard deduction. The following data relates to the current year:

Gross sales, net of returns, allowances, and discounts 5,000,000

Interest income on time deposits 10,000

Gain on sale of building 40,000

Total Goods Available for sale 1.500,000

Ending Inventory 280,000

Determine the taxable net income?

• 2,000,000

• 2,292,000

• 2,290,000

• 2,200,000

Multiple Choice

XYZ Corporation, a lessor of commercial spaces, opted to claim optional standard deduction. The following relates to its results of operations:

Gross receipts from rental of commercial spaces P4,500,000

Other receipts

Interest on lessees’ notes 60,000

Interest income on time deposits 10,000

Accrued but uncollected income

Rent 15,000

Interest on lessees’ notes 5,000

Gain cash sale of fully depreciated equipment 20,000

Cost of services

Cost of services paid 1,800,000

Accrued or unpaid cost of services 300,000

Determine the OSD assuming the taxpayer is using cash basis of accounting?

• 2,000,000

• 1,100,000

• 1,000,000

• 1,112,000

Multiple Choice

XYZ Corporation, a lessor of commercial spaces, opted to claim optional standard deduction. The following relates to its results of operations:

Gross receipts from rental of commercial spaces P4,500,000

Other receipts

Interest on lessees’ notes 60,000

Interest income on time deposits 10,000

Accrued but uncollected income

Rent 15,000

Interest on lessees’ notes 5,000

Gain cash sale of fully depreciated equipment 20,000

Cost of services

Cost of services paid 1,800,000

Accrued or unpaid cost of services 300,000

Determine the taxable net income assuming the taxpayer is using cash basis of accounting?

• 1,668,000

• 1,600,000

• 2,000,000

• 1,608,000

Multiple Choice

Ms. Nana, a taxpayer had the following results of operations:

2017

Gross Income P 1, 000,000

Itemized Deductions 1,200,000

Deduction Incentives 200,000

2018

Gross Income P 2,500,000

Itemized Deductions 1,000,000

Deduction Incentives 300,000

What is the net income in 2018?

• 800,000

• 400,000

• 1,000,000

• 900,000

Multiple Choice

Mr. Jungkook, a taxpayer has the following historical results of operations

2016 (600,000)

2017 (700,000)

2018 400,000

2019 (200,000)

2020 100,000

What is the total outstanding NOLCO at the end of 2020 which can be carried over in future years?

• 0

• 200,000

• 700,000

• 500,000

Multiple Choice

Mr. Diggie started a business in 2018. Disheartemed y heavy losses, he sold the business to Mr. Song at the start of 2019. The net income or (loss) of the business were:

2018

Net Income (NOLCO) (800,000)

2019

Net Income (NOLCO) (300,000)

2020

Net Income (NOLCO) 500,000

Compute the taxable net income of the business in 2020?

• 1,100,000

• 800,000

• 300,000

• 200,000

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