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Valencia ch 6 answer key

posted 13 Sept 2012, 01:23 by atty. sharon millan

Problem
6 – 5               Not in the choices =
P51,000

Net income
(P300,000/30%)   P1,000,000

Add: FB
charged to miscellaneous expense        170,000

Taxable
net income   P1,170,000

Multiplied
by corporate tax rate            
30%

Income tax
due   P   351,000

Less:
Income tax already paid        300,000

Additional
tax to be paid   P     51,000

 
The
fringe benefits of rank-in-file employee are subject to regular withholding tax
on wages, [Sec. 24 (A), NIRC]. There is no grossed-up monetary value involved.
If the BIR uncover the concealment resulting to the nonpayment of withholding
tax, the fringe benefits shall be disallowed as deductible expense. [Sec. 34
(A)
(1ai), NIRC]
 

Problem
6 – 6               C

Fringe
benefit tax (P102,000/68%) x 32%   P48,000

Income
tax:    

     Net income before tax (P1,750,000/70%) P2,500,000  

     Add: Fringe benefits charge to

miscellaneous expense      102,000  

     Total P2,602,000  

     Multiplied by corporate income tax rate            30%  

     Corporate income tax P   780,600  

     Less: Income tax already paid

(P2,500,000 – P1,750,000)      750,000   30,600

Tax
recovered by the government  
P78,600

 
Note: The
fringe benefit tax expense is not deductible because the related withholding
tax was not withheld and paid until the tax evasion was discovered by the
BIR.
 

Problem
6 – 7

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Correction: Should be - The car
ownership was transferred to Mr. Alegre.

1. Letter B  

  Cash P      34,000

  House
and lot – FMV, higher (ownership transferred) 544,000

  Car
– ownership transferred (P680,000 x 9/10)       612,000

  Monetary
value of fringe benefits P1,190,,000

     

2. Letter C  

  Grossed-up
monetary value (P1,190,000/68%) P1,750,000

Problem
6 – 8

1.   Letter C    

      Monetary
value of FB (P80,000/32%) x 68%  
P170,000

     

2.   Letter B    

      Grossed-up
monetary value (P80,000/32%)  
P250,000

     

3.   Letter D     

      A
fringe benefit tax is not an income tax of employer.  
P 
-  0   -

Problem
6 – 9               C

Meal
benefits (P10,200 x 6 months)   P  61,200

Educational
assistance (P13,600 x 6 months)       81,600

Fringe
benefits subject to FBT   P142,800

Salaries are subject to normal tax.

The fringe benefits subject to FBT shall only start from the time Mr. Rojas was
promoted to managerial level. His fringe benefits prior to his promotion
should
be subject to normal tax.

Problem
6 – 10             B

Deductible
from business income (P136,000/68%)
P 200,000

Problem
6 – 11             A

None,
because fringe benefit tax is a final tax and no deduction is allowed from
gross compensation income except personal exemptions and health or
hospitalization insurance actually
paid if the family income does not exceed
P250,000.

Problem
6 – 12             D

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Zero. No Fringe benefit tax is to be imposed on
fringe benefit of rank-in-file employee. Mr. Estrada is a company messenger.
His fringe benefit is subject to
withholding tax on wages.
 

Problem
6 – 13            

1. Letter A  

  Grossed-up monetary value (P6,000,000 x 5% x 50%)/68% P220,588

  Multiplied by FBT rate  

     32%

  Fringe benefit tax P  70,588

     

2. Letter B  

  Down payment P2,000,000

  Present value of 4 installments (P1,000,000 x 3.037) 3,037,000

  Total P5,037,000

     

  GMV (P5,037,000 x 5% x 50%)/68% P185,183

  Multiplied by FBT rate       

32%

  Fringe benefit tax P  59,258

Problem
6 – 14             D

FB Expense is equal to GMV (P2,000,000 x 5% x 50%)/68%   P73,529

Problem
6 – 15             B

Acquisition
cost = fair market value (higher than zonal value)  
P2,040,000

     

Monthly
fringe benefit [(P2,040,000 x 5% x 50%)/12]/68%  
P 6,250

Problem
6 – 16             A

Zero. Jean’s used of the condominium is not for her

benefit but for the benefit of B Corporation as the former conducts
investigation for inventory fraud.
 

Problem
6 – 17             A

Discounted price of the cars

(P1,000,000 x 95% x 50)   P47,500,000

Add: Transportation, insurance and

testing cost          500,000

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Total acquisition cost   P48,000,000

     

Acquisition cost assigned to

officers    

    
[(P48,000,000/50) x 10]   P9,600,000

     

Monetary value of 10 cars [(P9,600,000/5)

x 50%]   P   960,000

Divided by number of officers to

received the cars                10

Monetary value of fringe benefit of

each officer   P     96,000

[Sec.
2.33 (B), Rev. Regs. No. 3-98]

Problem
6 – 18            

1. Letter  A  

  Grossed-up monetary value [(P1,000,000/5) x 50%] /68% P147,059

  Multiplied by FBT rate       

32%

  Fringe benefit tax P  47,059

     

2. Letter  C  

  Grossed-up monetary value (P1,000,000/5)/68% P294,117

  Multiplied by FBT rate       

32%

  Fringe benefit tax P  94,117

Problem
6 – 19             D

Lease
price per vehicle [P6,000,000/(20 + 14 + 6)]   P150,000

Multiplied
by number of vehicle assigned to officers               6

Total
fringe benefits to officers   P900,000

     

Annual
value of fringe benefits of each officer    

     [(P900,000/6) x 50%]   P  75,000

Problem
6 – 20             C

Annual
depreciation allowed (P17,000,000/20)   P   850,000

Divided by
GMV factor             68%

Grossed-up
monetary value   P1,250,000

Multiplied
by FBT rate             32%

Annual
fringe benefit tax   P   400,000

Divided by
number of the members of the BOD                  5

Annual
fringe benefit tax for each director   P    
80,000

The use of
aircraft (including helicopters) owned and maintained by the employer shall be
treated as business use and not b e subject to the fringe benefit tax.

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The use of
yacht whether owned and maintained or leased by the employer shall be treated
as taxable fringe benefit. The value of the fringe benefit shall be measured
based on the
depreciation of a yacht at an estimated useful life of 20 years.
[Sec. 2.33 (B), Rev. Regs. No. 3-98]

 
Problem
6 – 21             B

Light and
power of his residential house   P  5,440

Grocery
items       6,800

Reimbursable
expense subject to FBT   P12,440

Only the personal expense reimburse.

Problem
6 – 22            D

Grocery items   P17,000

Pants and T-shirt      

3,400

Total monetary value of FB   P20,400

     

Fringe benefit tax (P20,400/68%) x 32%   P  9,600

Problem
6 – 23            B

FB expense (P476,000 x 75%)/68%   P525,000

Problem
6 – 24            D

Fringe
benefit tax (P16,320/68%) x 32%  
P 7,680

Problem
6 – 25             C

Fringe
benefit tax (P57,800/68%) x 32%  
P27,200

Problem
6 – 26            

1. Letter D    

  There is no FBT for rank-in-file employee.    

       

2. Letter B    

  Benchmark interest (P88,400 x 12%)   P10,608

  Less: Actual interest charge (P88,400 x 3%)   2,652

  Difference   P  7,956

       

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  FBT (P7,956/68%) x 32%   P  3,744

Problem
6 – 27            D

Professional
Tax Receipts   P    5,440

PICPA
Lifetime membership   13,600

Goma golf
club     68,000

Baguio
Country Club     340,000

Total
taxable fringe benefits  
P427,040

     

FBT
(P427,040/68%) x 32%   P200,960

All
membership fees paid by the company in behalf of the comptroller are considered
fringe benefits; hence, subject to FBT.

Problem
6 – 28             A

Hotel
accommodation [($1,600- ($300 x 4)] x P50/$1   P  20,000

Personal
expenses ($280 x P50/$1)       14,000

Total
amount of fringe benefits   P  34,000

     

Fringe benefit expense (P34,000/68%)   P  50,000

Problem
6 – 29            C

Fringe
benefit tax [(P54,400 x 30%) / 68%] x 32%   P  7,680

 
Problem
6 – 30             B

Fringe
benefit expense (P408,000/68%)   P600,000

Problem
6 – 31             A

Zero. The scholarship was obtained through

competitive examination.
 

Problem
6 – 32            

1.    
Letter
D

None.
Exempt because the educational benefit is related to work. (Employer’s benefit
rule)

2.    
Letter
B

P65,280
– Only the monetary value is deductible because the benefit is tax-exempt.

Problem
6 – 33             D

Grossed-up
monetary value (P170,000/85%)   P200,000

Multiplied
by applicable FBT rate           15%

Fringe
benefit tax   P  30,000 

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Problem
6 – 34             B

Fringe
benefit tax:    

     Chan (P30,000/75%) x 25%   P10,000

     Lapid (P51,000/68%) x 32%     24,000

Total
fringe benefit tax withheld   P34,000

Problem
6 – 35             C

Annual life insurance premium   P100,000

Amount of loan P1,000,000  

Less: Present value at 12% (P1,000,000 x 0.893)     

893,000  
107,000

Monetary value of fringe benefit subject to FBT   P207,000

Problem
6 – 36             C

Insurance
premium - VP for Operation (50% x P4,080)   P 2,040

Divided
by GMV factor        68%

Grossed-up
monetary value  P 3,000

Multiplied
by FBT rate        32%

Fringe
benefit tax P    960

Problem
6 – 37            

1. Rice
subsidy P12,000

  Nontaxable
uniform and clothing allowance 4,000

  Employees
achievement award 10,000

  Nontaxable
medical allowance to dependents (P125 x 12) 1,500

  Laundry
allowance 3,600

  Actual
medical benefits   10,000

  Total
nontaxable fringe benefits
P41,100

     

2. Car P214,000

  Divided by
grossed-up rate       68%

  Grossed-up
monetary value P314,705

  Multiplied
by FBT rate       32%

  Fringe
benefit tax
P100,705

Note: The new BIR interpretation is that the excess

of the actual fringe benefit given shall be taxable after deducting the de –
minimis threshold amount.  The
excess
amount of fringe benefit shall be subject to withholding tax on wages whether
the recipient employee is a rank-in-file or managerial employee.

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Problem
6 – 38            

1. Housing benefit (P12,240 x 110%)   P13,464

  Lions Club membership fee     20,400

  Total   P33,864

  Divided by grossed-up rate         68%

  Taxable amount of FB  
P49,800

       

2. Fringe benefit tax (P49,800 x 32%)  

P15,936

       

3. Violeta Vicente cannot deduct the

FBT from her gross income.    

       

  San Miguel Corporation, however, can

deduct the entire amount    

  of grossed-up monetary value

amounting to P49,800 from the    

  gross income of the corporation as

fringe benefit expense.    

Problem
6 – 39            

A. 1. Monetary
value   P68,000

         

  2. FBT
(P68,000/68%) x 32%   P32,000

         

B. 1. Down
payment   P200,000

    Add:
Present value of P180,000 installment at 18% per year:    

          Yr. 1: (P180,000 x 0.8475) 152,550  

           Yr. 2: (P180,000 x 0.7182) 129,276  

           Yr. 3: (P180,000 x 0.6086) 109,548  

           Yr. 4: (P180,000 x 0.5158) 92,844  

           Yr. 5: (P180,000 x 0.4371)   78,678   562,896

    Acquisition
cost   P762,896

    Divided
by              
5

    Monetary
value   P152,579

         

  2. FBT
(P152,579/68%) x 32%   P  71,802

         

C. 1. Monetary
value (P816,000 x 150%)   P1,224,000

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  2. FBT
(P1,224,000/68%) x 32%   P   576,000

         

D. 1. Annual
monetary value = annual depreciation (P1,020,000/25)   P     40,800

         

  2. FBT
(P40,800/68%) x 32%   P     19,200

         

E. 1. Monetary
value (P244,000 x 50%)   P   122,000

         

  2. FBT
(P122,000/68%) x 32%   P    57,412

         

F. 1. Monetary
value (P1,360,000 x 5% x 50%)   P  34,000

         

  2. FBT
(P34,000/68%) x 32%   P  16,000

Problem
6 – 40            

1. FBT
– condominium [(P6,000,000 x 5% x 50%)/68%] x 32%   P     70,588

  FBT
– car:    

       Down payment P  

300,000  

       Present value of P240,000 yearly

installment at 12%    

          (P240,000 x 3.605)     

865,200  

       Acquisition cost P1,165,200  

       Divided by               

5  

       Monetary value P   233,040  

       FBT – car (P233,040/68%) x 32%   P   109,666

       

2. Journal
entries:    

  FB
expense 70,588  

       Cash / FBT payable   70,588

       

  FB
expense 342,706  

       Car   233,040

       Cash / FBT payable   109,666

Problem
6 – 41            

1. Monetary
value – assignment of condominium (P5,000,000 x 5% x 50%) P 125,000

     

2. Grossed-up
monetary value of condominium (P125,000/68%) P 183,823

     
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3. Fringe
benefit tax on the use of condominium (P183,823 x 32%) P   58,823

     

4. Grossed-up
monetary value of the car (P500,000/5)/68% P 147,059

     

5. FBT
of car (P147,059 x 32%) P   47,059

     

6. None.
The cash is a fixed compensation income  

     

7 Zero.
Compensation income is subject to normal income tax.  

Valencia Ch 5 answer key

posted 13 Sept 2012, 01:22 by atty. sharon millan

Problem
5 –8                A

Basic minimum wage   P  90,000

13th month pay    7,500

15-day monetized unavailed

vacation leave   3,750

Overtime pay   24,000

Holiday pay   2,250

Christmas bonus (de-minimis)         5,000

Total nontaxable income   P132,500

Problem
5 –9                B

13th month pay   P  6,500

Deductible from gross compensation

income:    

        SSS contribution P3,000  

        Philhealth contribution   2,500     5,500

Amount excluded from gross income   P12,000

Problem
5 –10              C

Dividend income   P  60,000

Interest income on
EFCD to be taxable in the Philippines must be transacted with residents.    

Problem
5 –11              B

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Income from the Philippines:    

     Wagwag
business (P5,000 x 12)   P  60,000

    
Sari-sari store (P20,000 x 12)     240,000

Gross taxable income in the Philippines   P300,000

Problem
5 –12              D

13th
month pay (P390,000/13)   P30,000

De
minimis with the ceiling amount:    

     Rice subsidy (P1,500 x 12)   18,000

     Clothing allowance       4,000

Amount
of nontaxable compensation   P52,000

The
excess of rice subsidy over the ceiling is already taxable, because the 13th
mo. pay is already P30,000.

 Problem 5 –13             C

  Taxable Nontaxable

Total
basic salary P240,000  

13th
month pay   20,000

Excess
rice subsidy 6,000

De minimis
rice subsidy (P24,000 – P6,000)              . 18,000

Total
nontaxable compensation P240,000 44,000

The
P6,000 excess of rice subsidy is still exempt because if   combined w/13th mo pay and other
benefit the amount does not exceed P30,000.

Problem 5-14               D

MWE  

Basic salary P 96,000

Overtime pay 20,000

Hazard pay 2,000

Holiday pay 1,000

13th mo. Pay 8,000

Excess rice subsidy 6,000

Rice subsidy w/in ceiling    

18,000

Total nontaxable P151,000

Taxable P          0

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Problem 5-15               B

  Taxable Non-taxable

MWE:    

Basic salary P108,000

o.t. pay 30,000

hazard pay 2,000

holiday pay 1,000

13th mo.+
similar benefits:    

  9,000
13th mo. Pay
  18,000
Excess rice subsidy

Excess clothing to complete P30,000 13,000 3,000

  18,000
Rice subsidy – de minimis

Clothing allowance                .      

4,000

Total P154,000 P52,000

An
employee who receives additional compensation such as commissions, honoraria,
fringe benefits, benefits in excess of the allowable statutory amount of
P30,000, taxable allowances and other taxable income other than the SMW,
holiday pay, overtime pay, night shift differential pay and hazard pay shall
not enjoy
the privilege of being a MWE and, therefore, his/her entire earnings
are no longer exempt from income tax.
 

Problem  5-16              D

  Taxable Non-taxable

MWE:    

Basic salary 96,000

o.t. pay 20,000

   

13th mo.+
similar benefits:    

  8,000
13th mo. Pay
  6,000
Excess rice subsidy

Rice subsidy   18,000

     

Rent income 60,000  

Interest income, 4,000/80% 5,000

Total 181,000 32,000

MWEs
receiving other income, such as income from the conduct of trade, business, or
practice of profession, except income subject to final tax, in addition to
compensation income are not exempted from income tax on their entire income
earned during the taxable year.
 

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5-17                 D

Only P1,500 sickleave

benefit actually taken.

Problem 5 –18              C

Take home pay   P212,000

Nontaxable 13th month pay   (  

17,500)

Withholding tax  
13,500

Other income subject to normal tax       

20,000

Taxable income   P228,000

In
general, a MWE is not subject to WTW and income tax on his compensation income.
But if he has other income that is subject to normal tax, his entire income
during the year will be
subject to income tax, his compensation income,
however, will not be subject to WTW.

Problem 5 –19              C

     Taxable Nontaxable

Net pay P265,000  

Withholding tax 50,000  

Advances 6,000  

3th month pay (27,000) P27,000

Christmas bonus (de minimis) ( 

5,000) 5,000

SSS contribution               .    

4,000

Totals P289,000 P36,000

Problem 5 –20              C

      Taxable Tax-exempt

Net take home pay P13,000  

SSS contributions   P300

PAG-IBIG contributions   100

Union dues contributions   100

Office party contributions 75  

Charitable contribution (deductible only from business income) 25  

Withholding income tax       

400       
.

Totals P13,500 P500

Problem 5 –21              D

Monthly salary  
P15,000

Free
board and lodging is for convenience of employer.

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Problem 5 –22              B

Rent of apartment   P 
50,000

Reimbursement      
20,000

Taxable benefits  
P70,000

Note
that the tax base to determine the tax liability of supervisor should be the
grossed-up amount, meaning P70,000/68%.

Problem 5 –23              D

Proceeds of life insurance including 12% interest for 2 years  

P1,254,400

Less: Present value of life insurance proceeds (P1,254,400 x

0.797193877)  
  1,000,000

Interest income - Taxable  

P   254,400

Proceeds
of life insurance policy are not taxable but the interest thereof is taxable. (Rev. Rev.2, Sec.22; Sec.32Ba, NIRC)

Problem
5 –24              D

Proceeds of life insurance policy are not taxable.    

Problem 5 –25              B

Maturity value received P500,000

Premium paid (490,000)

Premium refund      40,000

Income in excess of
premium paid P 
50,000

The premium refund is

actually a decrease of premium paid.

Problem 5 –26              D

Zero, because, the P270,000 cash surrender value is just a partial

return of total contribution of P360,000.

 
Problem
5 –27              D                        

Car
insurance   P300,000

Accident
insurance   100,000

Life
insurance as beneficiary   500,000

Cash
surrender value of life insurance   30,000

Participating
dividend       10,000

Total
amount excluded from gross income   P940,000

 
The
participating dividend and cash surrender value are considered return of
premium. The interest income, however, is included in the gross income. It
represents income from the use of
insurance proceeds not yet taken. (Sec. 62,
Regs. No. 2)

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Problem
5 –28                                        

1. Letter C  

  Total
premium paid – excluded P500,000

     

  The
total premium paid is excluded because such amount represents return of
capital. [Sec. 32 (B)(2), NIRC]

     

2. Letter A  

  Total
consideration received – excluded P2,000,000

     

  The
proceeds of life insurance policies paid to the heirs or beneficiaries upon
the death of the insured are excluded from
the gross income of the
beneficiary. [Sec. 62, Regs. No. 2; Sec. 32 (A) (1), NIRC]

 
Problem 5 –29              D

  Taxable Nontaxable

Actual damages for

unrealized profit P100,000  

Interest on non-taxable
damages 20,000  

Actual damages for lost

products   P200,000

Exemplary damages due to

injuries   50,000

Moral damages due to

injuries   50,000

Actual liquidated
damages              .     80,000

Total P120,000 P380,000

Note:
On the part of Ernie Barron, the attorney’s fee is only a reimbursement of his
judicial expenses, but on the part of the counsel, such amount is reportable
income.

Problem 5 –30              A

Taxable income  
P  - 0 -

Problem 5 –31              A

The
retirement pay should be included in the gross income because Max retired at an
optional age and has rendered less than 10 years in service. To be excluded
from gross income, an
employee should have been in the service of the same
employer for at least ten (10) years and at least 50 years at the time of his
retirement. [Sec. 32 (B)(6)(a), NIRC]

Problem 5 –32              C

Cost
of life annuity contract   P1,350,000

Divided
by expected return (P360,000 x 15 years)     5,400,000

Cost
ratio   25%

Multiplied
by annual pension        360,000

Annual
amount of pension excluded from gross income   P     90,000

Problem 5 –33              D

  Taxable Nontaxable

Terminal
pay   P  60,000

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Life insurance   500,000

SSS death
benefit   10,000

Donations            
.     40,000

Totals P  - 
0  - P610,000

Problem 5 –34              A

The
termination is due to cause within the control of Jalosjos, separation pay is
taxable.

           

Problem 5 –35              D

Last pay
upon resignation from  his first
employer  
P100,000

Problem 5-36               B         

SSS death
benefit of P36,000

Problem 5-37               A

Sickness
benefit (P300 x 6 days x 90) P  1,620

Maternity
benefit (P300 x 78 days x 100%)   23,400

Total
exclusion P25,020

SSS
sickness benefit is equal to 90% of daily salary credit after compliance with
certain conditions. SSS daily maternity leave benefit is equivalent to the
average daily salary credit for 60
days or 78 days in case of caesarian
delivery, subject to certain conditions. [Sec. 14, R.A. 1161; R.A. 8282, as
amended]

Problem
5 –38              A

Zero, all
items enumerated are not subject to income tax.

Problem
5 –39              C

Interest
income from bank savings deposit, subject to final tax at source  
P4,000

His annual
income from professional fee is not more than P60,000 which is exempt.

Problem
5 –40              D

Zero. Gifts are

generally subject to donor’s tax and are not subject to income tax.

Problem
5 –41              D

Total
income (P100,000 x 10 months)   P1,000,000

Total
average expenses (P20,000 x 10 months)   (   200,000)

Income
subject to income tax  
P   800,000

Problem
5 –42              D

Zero. All
winnings received by Miss Lara are subject to tax because she has entered into
a contest (Miss International) which requires rendition of subjstantial future
services as a
condition to receive such prize or award.

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Problem
5 –43              A

Lotto
Philippine winnings  
P10,000,000

Problem
5 –44              B

Ramon
Magsaysay award   P    50,000

Athlete of
the year award   100,000

Prize for
winning the silver Olympic medal   500,000

Cash award
from Mr. Lim   250,000

Car from
Nissan   1,000,000

Winnings –
Philippine sweepstakes        100,000

Total
winnings/awards not subject to income tax  
P2,000,000

Problem
5 –45              A

Interest
income P  60,000

Gain
from sale of bonds classified as capital asset   140,000

Taxable
income P200,000

Interest
income on government bonds is taxable. Gain from sale of certificate of
indebtedness is tax-exempt only when the maturity is more than 5 years. [Sec.
32 (B)(7)(g), NIRC]

Problem
5 –46              B

Interest received from bond

investment P 120,000

Problem 5 –47              B
Interest
income   P120,000

Problem
5 –48              D

Interest
on expanded foreign currency deposit  
P100,000

Problem
5 –49              A

Income
from sale of invented products   P5,000,000

Sale of
technology     2,000,000

Total
revenue   P7,000,000

Less:
Research and development costs        800,000

Nontaxable
income  
P6,200,000

Note: The cost of product produced need not to be deducted anymore

because of the term “income from sale of invented products.”

Problem
5 –50              C
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Interest
income on bank savings deposit  
P10,000

Problem
5 –51              C

Interest
income from foreign currency deposit   P2,000,000

Interest
income from time deposit     1,000,000

Total
taxable income  
P3,000,000

Problem
5 –52             

1.    
Compensation income (P5,000 x
10)
P  50,000
 
 
2.    
Retirement benefits
P500,000
Salary
earned
     50,000
Gross
income

  P550,000

3. 
Same answer with No. 1  

P  50,000

Problem
5 –53             

Winnings from charity horse race

sweepstakes from PCSO
P  
500,000
Gains from redemption of shares in
mutual fund
300,000
Gain from sale of bonds with
maturity of more than five years
60,000
Gifts from friends
     200,000
Total exclusion from gross income
P1,060,000

Problem
5 –54             

        Exclude        Include

Proceeds of his life insurance

(P2,000,000) – (P15,000 x 25) P   375,000 P1,625,000

Proceeds of his mother’s life

insurance 1,000,000  

Cash gift 50,000  

Inheritance 3,000,000  

Rent income                  .      100,000

Total P4,425,000 P1,725,000

Problem
5 –55             

No,
the P1,500,000 transfer to be received by Miss Tandana is to be included for
income  taxation because the transfer is
in recognition of her services rendered. It
is not to be included as a part of
estate tax.

Problem
5 –56 

Dividend income P50,000

Interest income 2,000

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Prizes   25,000

Total taxable income P77,000

           

Problem
5-57

1.    
None – the taxpayer is a MWE
and the benefits does not exceed the allowable statutory amount of P30,000.

2.    
 

Gross compensation P109,200

SSS premium (   2,400)

Philhealth premium (   3,000)

Taxable compensation income P103,800

Problem
5 -58

Answer for both no. 1 and no.2

Compensation P128,000

SSS premium (2,400)

Philhealth     (3,000)

Gross taxable compensation income P122,600

Note: The MWE with earnings subject to

normal tax shall be taxable for his entire income during the year.

Problem
5 -59

1. Time
deposit P60,000

  Foreign
currency deposit   10,000

  Cooperative
income subject to final tax P70,000

     

2. Cooperative
income subject to normal tax P  - 0 -

 
The
cooperative’s ordinary income such as sales and income from lending to members
are not subject to income tax.
 

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Valencia ch 4 answer key

posted 13 Sept 2012, 01:19 by atty. sharon millan

Problem 4 – 8               A         

Net take home pay   P180,000

Add: Withholding income tax       30,000

Total   P210,000

Less: 13th month pay       10,000

Gross reportable compensation   P200,000

Unused 10-day vacation

leave is nontaxable if it is converted into cash (Rev. Regs. No. 10-2008; BIR
Ruling No. 93-34). In the above problem, the 10-day vacation leave was actually
availed; hence, taxable.

Problem 4 – 9               D

Salary (P370,000 + P50,000) P420,000

Per diem as a board of director 200,000

Taxable thirteenth month pay

(P35,000 – P5,000)        5,000

Gross taxable compensation income P625,000

Problem
4 – 10             B

Salary   P150,000

Overtime
pay   30,000

13th
month pay and other bonuses       15,000

Total
compensation income  
P195,000

Problem
4 – 11             B

Salary   P120,000

Tips   360,000

Cost and
living allowance         5,000

Total
taxable compensation income  
P485,000

Note: New BIR interpretation provides that the 13th month pay
and other benefits amounting to P30,000 and below is not taxable.  Since the 13th month pay is only
P10,000, the P20,000
achievement awards being part of de-minimis can be used as
other benefits, to complete the P30,000 nontaxable threshold.

Problem
4 – 12             C

Salary (P120,000 + P24,000) P144,000

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Overtime pay 36,000

Payment of services (P4,000 + P30,000) 34,000

Present value of non-interest bearing notes

(P30,000 x 0.909)     27,270

Reportable taxable income per ITR P241,270

 
In general, interest income is subject to final
tax; hence not to be reported in the ITR. 
Non-interest bearing note is to be reported at its discounted value when
received. (Sec. 2.78.1, Rev. Reg. No. 2-98)
 

Problem
4 – 13             D

(First
employment for 30 years received at the age of 50)   P500,000

Aside from the requirement

that the plan should be reasonable, the Tax Code requires that the retiring
employee should have been in the service of the same employer for at least ten
years and is not less than fifty years of age at the time of his retirement.
The taxpayer should not also have previously availed of the privilege under a
retirement benefit plan for the
same or another employer.)

                                  

Problem
4 – 14             B

First
employment – resigned  
P300,000

Problem
4 – 15             C

Gross
compensation income (1,000 x P10)  
P10,000

Problem 4 – 16             B
  Compensation Capital
gain

Compensation
income (P13 – P12) x 10,000  
P 10,000

Capital
gain (P15 – P13) x 10,000  
P 20,000

Problem
4 – 17             C

  Compensation Capital
gain

Compensation
income (P25 – P23) x 10,000  
P 20,000

Capital
gain (P30 – P25) x 10,000  
P 50,000

Correction: The option was exercised and sold in

year 200C when the market price was P30.

Problem
4 – 18             C

Regular
compensation per month   P  50,000

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Cancellation of indebtedness (P300,000 – P275,000)      
25,000

Total compensation
income – December 200B  
P75,000

Problem
4 – 19             B

Insurance
premium – beneficiary Sico  
P5,000

Problem
4 – 20             A

Basic compensation (P30,000 x 12)   P360,000

Shares of stock (P100 x 100)   10,000

Stock option (P120 – P80) x 100   4,000

Annual insurance premium (P4,000 x

50%)         2,000

Gross compensation   P376,000

Problem
4 – 21             B

Cleaning
of business equipment   P 1,000

Repair
service of store      3,000

Total
casual service income  
P 4,000

Problem
4 – 22             C

Total
purchases   P500,000

Transportation
cost on purchases   5,000

Unsold
goods
   ( 40,000)

Cost of
goods sold  
P465,000

Problem 4 – 23             C
Inventory,
beginning   P    20,000

Purchases   1,200,000

Purchase
discounts   (  10,000)

Purchase
returns   (  40,000)

Transportation
in   5,000

Inventory
end      ( 
50,000)

Cost of
sale  
P1,125,000

Problem 4 – 24             C
       Year 1       Year 2

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Inventory,
beginning   P   50,000

Inventory,
ending (P50,000) (  30,000)

Purchases 850,000 900,000

Freight –
in 10,000 15,000

Purchase
discount (  20,000) (  25,000)

Cost of
sales P790,000 P910,000

Problem 4 – 25             B
Sales   P1,275,000

Sales
returns   (      25,000)

Net sales   P1,250,000

Less: Cost
of goods manufactured and sold    

         Purchases – raw materials P   540,000  

         Freight-in 20,000  

         Raw materials, ending inventory (     10,000)  

         Raw materials used P   550,000  

         Direct labor 400,000  

         Factory overhead      200,000  

         Total manufacturing cost P1,150,000  

         Work-in-process, ending inventory (  100,000)  

         Finished goods, ending inventory   (   

50,000)    1,000,000

Gross business
income  
P   250,000

Problem 4 – 26             B
Advance
payment   P  2,000

Additional
collection   8,000

Office
machine       3,000

Gross
service income  
P13,000

Problem
4 – 27             B

Professional
fee, accounting services   P500,000

Less:
Direct costs of services:    

         Salaries of accounting staff P150,000  

         Accounting supplies     10,000    160,000

Gross
business income for MCIT purposes*   P340,000

Correction:
The requirement should qualify that the gross business income is for MCIT
purposes.

Problem 4 – 28             B

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Interest
income from clients   P50,000,000

Trading gain   10,000,000

Less: Cost of services:

         Lending and investments funds

salaries P3,000,000  

         Interest expenses paid to depositors   2,000,000    

5,000,000

Gross
income for MCIT purposes   P55,000,000

Problem
4 – 29             C

Interest income from

clients   P10,000,000

Gain on sale of capital

assets   5,000,000

Rent income      2,000,000

Total   P17,000,000

Less: Cost of services:    

        Salaries of bank employees assigned

in    
            lending and investments of funds P3,700,000

        Depreciation of computers and    

            teller machines used 600,000

        Direct supplies used 200,000  

        Interest expense paid to depositors 1,500,000    

6,000,000

Gross income for MCIT

purposes   P11,000,000

Problem 4 – 30             B
Service
charges:    

     Originating from the Philippines   P

150,000

     Collection abroad of collect messages

originating in the Philippines        60,000

Gross
income for Philippine Income Tax computation  
P 210,000

Problem
4 – 31             B

Rent for
year:    

200A   P   80,000

200B   480,000

200C        40,000

200B
Reportable income  
P 600,000

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Problem
4 – 32            

1. Letter
C  

  Advanced deposit P  40,000

  Monthly rental (P20,000 x 10 months) 200,000

  Annual insurance premium to be paid by the

lessee    
      (P6,000 x 10/12) 5,000

  Portion of real estate tax to be paid by the

lessee  
     
(P3,000 x 10/12)       2,500

  Rent income
P247,500

 
As a general rule, pre-collection of rental is
taxable in full to the lessor when received regardless of accounting method
used.
 

2. Letter
B  

  Monthly rental (P20,000 x 10 months) P200,000

  Annual insurance premium to be paid by the lessee  

     
(P6,000 x 10/12) 5,000

  Portion of real estate tax to be paid by the

lessee  
     
(P3,000 x 10/12)       2,500

  Rent income
P207,500

  Commission income (P2,000,000 x 5%)   100,000

  Reportable taxable income

P307,500

Problem
4 – 33             D

  Outright Spread-out

Year 1
Outright method  
P240,500

Year 1
Spread-out method    

    Value of investment   P240,500.00

    Less: Accum. depreciation [(P240,500 -

P560)/8 yrs] x 4.75 yrs     142,464.37

    Book value, end of lease   P  98,035.63

    Divided by remaining years of contract                4.75

    Annual income from improvement   P       20,639

    Multiplied by months in a year               9/12

    Year 1 spread-out – rent income on

improvement  
P       15,479

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Problem
4 – 34             C

  Outright Spread-out

Outright P180,000  

Spread-out   P  - 
0  -

For spread
out method, there is no reportable income from leasehold improvement for year
200B because the said improvement was completed at the end of the year.

Problem 4 – 35             C
Cost of
improvement   P300,000

Less:
Accumulated depreciation at the end of the lease (P300,000/6) x 4 years and 7
months     229,167

Book value
at the end of the lease   P  70,833

Divided by
number of years until the termination of lease contract = 4 years and 7
months           4.58

Annual
additional income   P  15,454

Multiplied
by number of years expired (from March 31, 200B to December 31, 200D)           2.75

Reported
additional income from improvement   (P42,500)

Book value
of improvement at the time of pre-termination    

     Cost P300,000  

     Less: Accum. depreciation at

pre-termination (P300,000/6) x 2.75 years   137,500   162,500

Additional
income in 200D from the pre-termination of contract  
P120,000

Problem 4 – 36             A
Interest
income from an investment in a 10-year bond   P  40,000

Interest
income from 5-year time deposit in Philippine bank   50,000

Interest
income from expanded foreign currency deposit       60,000

Total
taxable interest income  
P150,000

Note:
Technically speaking, the interest from 5-year time deposit in Philippine bank
is taxable because the period involved is not more than 5 years and the deposit
is not BSP prescribed
form.

Problem
4 – 37             D

Year
3 interest income of P4,461.20.
 

Problem
4 – 38             D

Royalty
income as author (P100,000 x 10%)   P  10,000

Royalty
income from franchising (P200,000 x 20%)   40,000

Royalty
income from gold mine (P500,000 x 20%)     100,000

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Total
final tax  
P150,000

Problem
4 – 39             D

  Copyright Patent

Gross royalties: P
35,000  

  
Copyright (P31,500/90%)    

  
Patent (P20,000/80%)   P
25,000

Income tax – final    

  
Copyright (P35,000 x 10%) (   3,500)  

  
Patent (P25,000 x 20%)              .  ( 
5,000)

Income after tax P 31,500 P 20,000

Problem 4 – 40            
1. Letter
B  

  Royalties within derived from:  

       Pain
reliever invention (P100,000 x 20%) P20,000

      
Musical compositions (P200,000 x 10%) 20,000

       Books
(P500,000 x 10%)   50,000

  Final tax on royalty income P90,000

     

2. Letter
D  

  Royalties outside derived from:  

       Pain
reliever invention P200,000

      
Musical compositions 100,000

       Books   300,000

  Royalty income subject to normal tax P600,000

 
In general, royalties derived from sources within
the Philippines are subject to a final tax of 20%, except royalties on books,
other literary works and musical
compositions which shall be subject to a final
tax of 10%. Royalties received by resident citizens from sources outside the
Philippines shall be subject to normal
tax under Section 24 (A) of the NIRC and
by the domestic corporation under Section 27 (A) of the NIRC.
 

Problem 4 – 41             A
P500,000 - Dividends earned by a domestic corporation from
a foreign corporation are taxable.
 

Problem 4 – 42             A
The dividend
received by a domestic corporation from another domestic corporation is
nontaxable.

Problem 4 – 43             C
First
prize in Talentadong Pinoy   P10,000

2nd
place in bicycle race       6,000

3rd
place in chess tournament     15,000

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Amount
subject to normal tax   P31,000

In general, prizes (reward for a contest) are

subject to final tax of 20% except if the amount of the prize is P10,000 or
less which will be subject to normal tax. Winnings (reward that
depends on
chance) are subject to 20% final tax regardless of amount. [Sec. 24 (B)(1),
NIRC]

Problem 4 – 44             D
First prize – raffle draw (P50,000 –
P1,000)   P  49,000

Gambling winnings   300,000

Beauty contest winnings     100,000

Taxable prizes and winnings  

P449,000

 
Problem 4 – 45             C
       Year 2      Year 3
     Year 1

Income
(loss) P100,000 (P
20,000) P  50,000

Less:
NOLCO (P25,000 – P20,000 – P10,000)     5,000

        Bad debts written off     25,000     10,000       5,000

Income (loss)
before bad debts recovery P  75,000 (P
30,000) P  40,000

Bad debts
recovery of previous year with tax benefit               .      25,000       8,000

Taxable
income P  75,000 (P  
5,000) P  48,000

Note: The
tax benefit allowed in year 2 for the bad debts written off is only P5,000;
hence, the reportable bad debts recovery in year 3 should also be P5,000.

Problem 4 – 46             D
Year 1: No
bad debt recovery     None

Year 2:
Bad debt recovery     P 600

Problem 4 – 47             D
P5,000 local
tax recovery.

Problem 4 – 48             C
Real
property tax   P
10,000

Local
taxes           500

Reportable
income from tax refund   P 10,500

Problem 4 – 49             B
Unfair competition   P400,000

Loss earnings   100,000

Moral damages for breach of contract   150,000

Exemplary damages for breach of contract   50,000

Interest on damages       10,000

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Gross income from damage recoveries subject to
tax   P710,000

Actual
damages are considered taxable income to the extent that such damages
constitute a loss of anticipated profits, and are non-taxable to the extent
they represent a return of capital or
investment. However, moral and exemplary
damages awarded as a result of a breach of contract are subject to
income tax, and, consequently, withholding tax. (BIR Ruling No. DA-489-
2005
dated December 6, 2005)

Take
note that the moral damages and exemplary damages awarded were not on account
of injuries or sickness.

Problem 4 – 50             C
Annuity
received   P
20,000

Present
value (P20,000 x 0.9091)      18,182

Interest
income - Taxable annuity   P   1,818

Note: The
present value factor of P1 for an effective interest rate of 10% is 0.9091.

Problem 4 – 51             D
Annuity
received   P
5,880

Present
value (P5,880 x 0.8928)      5,250

Interest
income - Taxable annuity   P    630

Problem 4 – 52             B
Excess of
withdrawable amount ($10,000 - $1,000)   $   9,000

Multiplied
by exchange rate per 1 dollar  
        P 50

Reportable
income received by error   P450,000

Problem 4 – 53             C
Net
increase in net asset   P108,000

Less:
Salary in a year (P5,000 x 12)       60,000

Illegally
obtained income - taxable   P  48,000

 
Correction: The increase
in net worth should be P108,000.

Note:
Income derived from illegal source is taxable even if the taxpayer is a MWE.

Problem 4 – 54

Gross income   P 425,000

 
In case of taxpayers engaged in the
sale of service, “gross income” means gross receipts less sales returns,
allowances and discounts. [Sec. 27 (A) NIRC]

Problem 4 – 55
Salary P300,000

Corporate shares received (1,000

shares x P100) 100,000

Cancellation of debt in lieu of

service rendered 50,000

Profit sharing     40,000

Gross taxable compensation income P490,000

 
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Problem 4 – 56
Licensing
fee   P  30,000

Registration
fees of delivery trucks   4,000

Real
estate tax   5,000

Community
tax   3,000

Foreign
income tax previously claimed as deduction       80,000

Reportable
gross income on tax refunds   P122,000

Problem 4 – 57

1. Gross
income – trading business (P500,000 – P200,000)   P300,000

  Gross
income – warehouse (P200,000 – P150,000)   50,000

  Net
capital gains (loss) on personal properties    

       Computer – more than 1 year    

            (P10,000 – P20,000) x 50% (P5,000)  

       Car – more than 1 year (P100,000 –

P50,000) x 50%    25,000     20,000

  Gross
income subject to regular tax   P370,000

       

2. Unutilized
portion of sale of residential house    

     (P1,000,000 – P800,000) x 6% P12,000

Problem 4 – 58
Salary
(P25,000 + P302,000)   P327,000

Income tax
paid by the employer   5,000

Note
receivable       20,000

Total
compensation   P352,000

Business
gross income P
400,000  

Allowable
expenses (
250,000) 150,000

Prepaid
rent income 50,000

Bad debts
recovered previously written-off (P38,000 x 60%)     22,800

Taxable
income subject to tabular tax P574,800

Valencia Ch 3 answer key

posted 13 Sept 2012, 01:13 by atty. sharon millan

Problem 3 – 5               C

Net assets ending (P300,000 – P50,000)   P250,000

Net assets beg. (P500,000 – P150,000)   ( 350,000)

Balance  
(P100,000)

Add: Owner’s drawings  

  240,000

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Reportable income (loss)   P140,000

Problem 3 – 6               B         

Increase in total assets   P1,520,000

Decrease in total liabilities        330,000

Dividend declared      100,000

Total   P1,950,000

Less: Additional paid-in capital P800,000  

       
Unrealized gain    
50,000     
850,000

Reportable income   P1,100,000

Problem 3 – 7               B         

Increase in total assets    P 250,000

Decrease in total liabilities   160,000

Drawings   20,000

Additional investments    ( 

50,000)

Total income  
P 380,000

Problem 3 – 8               C         

Sales   P30,000

Less: Cost of sales (P30,000 x 40%) P12,000  

        Rent
expense 2,000  

       
Kiosk – depreciated value (P3,000 – P2,900) 100  

       
Interest expense (P20,000 x 1%)      
200  
14,300

Net income – return on capital   P15,700

Problem 3 – 9               D         

  Return of Capital Return on Capital

Time deposit balance P250,000 P30,000

Problem 3 – 10                         A         

There is no reportable income because there is no actual sale yet during
200x.  

Problem 3 – 11                         D         

Interest credited on peso-savings deposit

(40,000/80%)   P  50,000

Matured interest on coupon bonds, not yet

collected   80,000

Cancellation of indebtedness from SMC in which    

      Arom
has equity investments 120,000

Share in joint venture not yet received   200,000

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Payment of damanges deposited in court by a

competitor    

      for
unrealized profit    
60,000

Income realized   P510,000

Increases or decreases in value of

investments are not realized gain or loss. Payment of damages for unrealized
profits is a taxable income. Income may be constructively received even if
not
physically transferred to a person for as long as it is credited to the account
of, or segregated in favor of a person.

Problem 3 – 12                         C         

  Year 1 Year 2         Year 3

Sales 0 0 P1,800,000

Cost of sale 0 0 (1,000,000)

Disposal cost 0 0 (     50,000)

Income for each year 0 0

P  
750,000

Problem 3 – 13                         A         

  Taxable Income Nontaxable Income

Salary (P260,000/13) x 12 P240,000  

Raffle winnings 70,000  

13th month pay (P260,000/13) x 1   P  20,000

Lotto winnings               .   500,000

  P310,000 P520,000

 
Problem 3 – 14             D                     

Within:   Taxable Income

    
Compensation income   P180,000

     Income
from grocery store   50,000

Outside:        

    
Compensation income   120,000

     Lotto winnings     100,000

Total income taxable in the Philippines   P450,000

Note: Lotto winnings earned outside the Philippines by a resident Filipino

citizen are taxable in the Philippines.

Problem 3 – 15             B                     

Salary from the Philippines, net of

tax   P250,000

Add: Withholding tax       50,000

Total income reportable in the

Philippines   P300,000

OCW are exempt from income tax on

income earned outside the Philippines. [Sec. 23 (C), NIRC]

Problem 3 – 16             B                     

Amount
of dividend received   P600,000

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Multiplied
by percent of Sungad’s operation    

     within based on gross income      20/30

Dividend
income – taxable in the Philippines   P400,000

Problem 3 – 17                                    

1. Letter
C  

  Net salary as university professor P240,000

  Add: Withholding tax on wages     20,000

  Compensation income P260,000

     

2. Letter
B  

  Gross audit service income

(P135,000/90%) P150,000

  Add: Gross rent income

(P114,000/95%)   120,000

  Total income from profession and

business P270,000

     

3. Letter
C  

  Interest income (P8,000/80%) P10,000

  Add: Dividend income (P4,500/90%)     5,000

  Total passive income P15,000

     

4. Letter
D  

  Gain from sale of personal car P3,000

  Add: Gain from sale of shares of

stock – outside  

          Stock market (P2,850/95%)   3,000

  Total capital gains P6,000

Problem 3 – 18             A                     

Professional fee (P450,000/90%)   P500,000

Salary (P300,000 + P60,000)   360,000

Prizes        
8,000

Earnings subject to normal tax   P868,000

     

Capital gains - shares of  stock:    

      First
P100,000 (P95,000/95%) P100,000  

      Over
P100,000 (P54,000/90%)    
60,000 P160,000

Winnings (P40,000/80%)      

50,000

Earnings subject to final taxes   P210,000

Problem 3 – 19             D                     

First 4 months (P12,000 x 4)   P  48,000

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Remaining months (P15,000 x 8)   120,000

13th month pay (P168,000/12)       14,000

Gross compensation income   P182,000

Problem 3 – 20             B                     

Reportable income is the market value of the car

received  
P120,000

Problem 3 – 21             A                     

Market value of the service received  

P6,000

Problem 3 – 22             C                     

Face value of the non-interest bearing note   P30,000

Multiplied by the present value factor of 10%

annuity       0.909

Compensation income – present value of the note  

P27,270

Problem 3 – 23             A                     

Compensation income  
P50,000

Interest income (P50,000 x 12% x 6/12)  

P3,000

Problem 3 – 24             B                     

Collections during the year   P490,000

Expenses actually incurred   (150,000)

Net income before personal exemption – cash basis  

P340,000

If the service business opted to

report on accrual basis, such method can only be applied when it
comes to reporting of expense.

Problem 3 – 25             A                     

Gross income (P1,000,000 – P600,000)   P400,000

Actual operating expenses (P200,000 x 80%)   (160,000)

Net income before other income   P240,000

Add: Gain from sale of old furniture       20,000

Taxable income  
P260,000

Problem 3 – 26                                    

1. Letter C    

  Cash P  50,000

  Fair market value of property

received 100,000

  Mortgage assumed by the buyer 450,000

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  Installment payments:  

      
First year 100,000

      
Second year 200,000

      
Third year 300,000

      
Fourth year      400,000

  Selling price P1,600,000

       

2. Letter D    

  Selling price P1,600,000

  Less: Mortgage assumed by the buyer      450,000

  Balance P1,150,000

  Add: Excess of mortgage over cost

(P450,000 – P400,000)        50,000

  Contract price P1,200,000

3. Letter D    

  Down payments:  

      
Cash (down payment) P  50,000  

      
Fair market value of property received 100,000  

  Installment received in the year of

sale 100,000  

  Excess of mortgage over cost (P450,000

– P400,000)     50,000  

  Initial payments P300,000  

       

Problem 3 – 27             C

Selling price   P700,000

Add: Excess of 

mortgage over cost (P600,000 – P500,000)     100,000

Total   P800,000

Less: Mortgage assumed by the buyer     600,000

Contract price   P200,000

Problem 3-28

1. 
A  
 

    
Income 200C - casual sale (P12,000 – P3,000)  
P9,000

    
Multiplied by holding period – more than 1 year  
   50%

    
Reportable income  
P4,500

The
sale is considered cash sales because the 200C initial payments (P1,000 +
P1,000 + 2,000) exceeds 25% of the selling price; P4,000/P12,000 = 33%

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2. 
B  
 

    
Reportable income 200C – regular sale (P9,000 x P4,000/P12,000)    
P3,000

Since
the  property is sold in regular basis,
installment reporting of income is allowed.

Problem 3 – 29             B

Total revenue   P1,000,000

Cost of sale   (   500,000)

Income to be reported  
P   500,000

Problem 3 – 30             A

Contract price   P50,000,000

Completed as of this year, 50%   P25,000,000

Cumulative cost, P10 M + 9M     19,000,000            

Cumulative income   P  6,000,000

Less:
Reported prior year (P50M x 30%) – P10M       5,000,000

Reportable
income this year   P  1,000,000

                              

Problem 3 – 31             D

Contract price   P 1,000,000

Less: Cost (P90,000/20%)         450,000

Gross profit   P    550,000

Multiplied by percent of completion               20%

Reportable income under percent of

completion   P    110,000

Problem 3 – 32             D

Contract price   P1,200,000

Less: Total costs (P432,000 +

P184,250 + P103,750)        720,000

Total profit   P   480,000

Less: Previous years’ reported

income:    

Accomplished contract price for 200A

and 200B (P1,200,000 x 85%) P1,020,000  

Previous years’ actual costs:    

                  200A (   432,000)  

                  200B (   184,250)      403,750

Percent of completion – 200C

Reportable income   P     76,250

Problem 3
– 33             A

Year 3 sales   P 500,000

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Less: Cost incurred as of year 3:    

         Year 1 P 100,000  

         Year 2 200,000  

         Year 3      50,000    350,000

Year 3 – reportable income   P

150,000

Problem
3 – 34             C

Harvested crops sold   P 2,000,000

Less: Total direct costs:    

         Year 1 P 300,000  

         Year 2 100,000  

         Year 3 100,000  

         Year 4 100,000  

         Year 5    400,000    1,000,000

Reportable income – year 5   P

1,000,000

Problem 3 – 35                        

Cash basis
income (300K +800K +100K)   P1,200,000

Accrual
expenses        500,000

Net income
before personal exemption   P   700,000

Problem 3 –
36

Accrued sales (P2,000,000 +

P520,000)   P2,520,000

Less: Cost
of sales     1,200,000

Gross
income   P1,320,000

Less:
Operating expenses (P600,000 x 70%)        420,000

Net income   P   900,000

Problem 3 –
37

      Year 1     Year 2

Total
harvest for the year at selling price P50,000 P100,000

     

       Cash  Accrual      Cash  Accrual

Harvests
sold:        

   (80 cavans x P500) P40,000 P40,000    

   (190 cavans x P500)     P95,000 P95,000

Ending
inventory:        

   (20 cavans x P500)    

10,000  

   (30 cavans x P500)    

  15,000

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Beginning
inventory:    
   

   (20 cavans x P500)             .             .

            .  ( 10,000)

Gross
income for the year
P40,000 P50,000 P95,000 P100,000

Problem 3 – 38                                    

1. 
Cash Method    Trading         Rent         Total
 
Farming

  Revenue P  50,000 P150,000 P100,000  

  Equipment
sold   25,000    

  Costs:        

       Cost of products purchased   (  90,000)    

       Carrying value of farm equipment               . (  25,000)               .  

  Gross
income P  50,000 P  60,000 P100,000 P210,000

2. 
Accrual Method    Trading         Rent         Total
 
Farming

  Revenue P  50,000 P150,000 P100,000  

  Equipment
sold   25,000    

  Inventory,
ending 9,000      

  Inventory,
beginning (    6,000)      

  Costs:        

       Cost of products purchased   (  90,000)    

       Carrying value of farm equipment               . (  25,000)               .  

  Gross
income P  53,000 P  60,000 P100,000 P213,000

Problem 3 – 39

1.     Letter C

Cash receipts:    

Sale of livestock (P200,000 +

P300,000)   P500,000

Sale of livestock for rent   10,000

Sale of machinery   20,000

Rent of livestock for rent        50,000

Total cash receipts   P580,000

Less: Cost of livestock purchased    

          (P50,000 + P175,000 – P100,000) P125,000  

          Cost of livestock for rent sold 7,000  

          Cost of machinery sold      15,000    147,000

Gross income P433,000

2.     Letter A

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Sale of livestock (P200,000 +

P300,000)   P500,000

Less: Cost of livestock purchased      125,000

Balance   P375,000

Add: Inventory, end – livestock

produced        50,000

Total   P425,000

Less: Inventory, beg. – livestock

produced      180,000

Balance   P245,000

Add: Gain from sale of livestock for

rent    

            [P10,000 – (P15,000 – P8,000)] P  3,000  

        Gain from sale of machinery    

            [P20,000 – (P50,000 – P35,000)] 5,000  

        Rent of livestock   50,000      58,000

Gross income   P303,000

 
The
difference between the cash basis and the accrual basis is the decrease in
inventory of livestock produced by P130,000. A comparison is prepared as
follows:
 

Ending
inventory – livestock produced P   50,000
Less:
Beginning inventory – livestock produced    180,000
Decrease
in inventory P 130,000
   
Cash
basis – gross income P
433,000
Less:
Accrual basis – gross income    303,000
Difference P 130,000

Inclusions and exclusions

posted 11 Sept 2012, 00:43 by atty. sharon millan
 
[
updated 11 Sept 2012, 00:44
]

virgilio reyes ch 5 exercises

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13 all exempted minimum wage earner

14 exclusions
reimbursement 5,000.00
13th mo pay and christmas bonus 30,000.00
SSS Contrib 10,000.00
Pagibig 5,000.00
Philhealth 4,000.00
Labor union 1,000.00 55,000.00

15 Inheritance 500,000.00

16 subject to Final tax

17 Proceeds from
accident insurance 20,000.00
Life insurance as beneficiary 200,000.00
Cash surrender value of life insurance 50,000.00 270,000.00

18 If received from fund of employer 150,000.00

if received from general fund none

19 separation due to redundancy 40,000.00

20 separation pay 200,000.00

Sheet1

Income from business, dividend and interest

posted 11 Sept 2012, 00:43 by atty. sharon millan

virgilio reyes ch 6 exercises

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11 Net sales 1,000,000.00
COS 400,000.00
Gross Income 600,000.00
Dividend
RFC 5,000.00
Int NR 15,000.00 620,000.00

dividend domestic copr exempt

Int Phil Currency FT
Gain on sale of land CGT

12 Dividend received if res citizen if domestic corp

in cash FT 10% exempt
in propert FT 10% exempt
treasury stock FT 10% exempt
optional stock dividend FT 10% exempt

13 Purchased + dividends 150 shares

new cost 120,000.00

150.00 800.00

SP 1100 x 40 44,000.00
C 800 x 40 32,000.00
12,000.00

basis 1200/share

14 Cost of common share before SD

1000 sh @P1000 1,000,000.00

Allocation of cost
Common 1000 @1200 1,200,000.00
Sheet1

Gains and losses from sales or exchanges of assets

posted 11 Sept 2012, 00:42 by atty. sharon millan

virgilio reyes ch 7 exercises

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15 Gross income 5,000,000.00
Bus Exp 3,000,000.00 2,000,000.00

gain on sale of capital asset held for 10

months 60,000.00
loss on sale of capital asset held for 3 years 30,000.00 30,000.00 net capital gain

taxable income 2,030,000.00

16 Gross income 1,000,000.00

Bus Exp 400,000.00 600,000.00

gain on sale of capital asset held for 6

months 50,000.00
loss on sale of capital asset held for 2 years 30000x50% 15,000.00 35,000.00
635,000.00
personal exemption 50,000.00
585,000.00

17 Gross income 1,200,000.00

Bus Exp 800,000.00 400,000.00

gain on sale of capital asset held for 3 years 100000x50% 50,000.00

loss on sale of capital asset held for 9
months -60,000.00 -10,000.00

personal exemption 50,000.00

350,000.00

18 200A
Gross income 4,000,000.00
Bus Exp 2,000,000.00 2,000,000.00 taxable income
Capital gains 100,000.00
Sheet1

virgilio reyes ch 20 exercises

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15 dividend from domestic corp FT 10%

sale of land and bldg 6,000,000.00 6% 360,000.00

Sale of shares of stock 100,000.00 5% 5,000.00
10,000.00 10% 1,000.00
6,000.00

GI 2,000,000.00
exp 1,600,000.00
400,000.00

int NR 25,000.00
ord net income 425,000.00

capital gain (loss)

Bond 10% 50,000.00
Res FC shares -20,000.00
30,000.00

Total 455,000.00
PE 50,000.00
TI 405,000.00

16 Capital gain 6% x 5000000 300,000.00

initial payment 3/10/2010 625,000.00

9/10/2010 625,000.00 1,250,000.00

1250000/5000000 (CP) 0.25

Installment payment
3/10/2010 1,250,000/5,000,000 x 625,000 156,250.00
sept 10, 2010 1,250,000/5,000,000 x 625,000 156,250.00
3/10/2011 1,250,000/5,000,000 x 3,750,000 937,500.00 1,250,000.00
Sheet1

virgilio reyes ch 21 exercises

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15 Initial payment
3/1/2011 1,000,000.00
9/1/2011 1,000,000.00 2000000

2000000/8000000 0.25

SP 8,000,000.00
C 3,000,000.00 5,000,000.00

Installment reporting
3/1/2011 5000000/8000000x1000000 625,000.00
9/1/2011 5000000/8000000x1000000 625,000.00
3/1/2012 5000000/8000000x6000000 3,750,000.00 5,000,000.00

16 Initial payment
11/10/2011 625,000.00
625000/5000000 0.13

SP 5,000,000.00
C 2,000,000.00 3,000,000.00

Income to be reported
11/10/2011 3000000/4000000x625000 468,750.00
1/10/2012 3000000/4000000x625000 468,750.00
3/10/2012 3000000/4000000x2750000 2,062,500.00

17 Initial payment
3/10/2011 250,000.00
11/10/2011 250,000.00
excess of ent 1,000,000.00 1,500,000.00

1500000/6000000 0.25
Sheet1

Income from rents and farming

posted 11 Sept 2012, 00:40 by atty. sharon millan

virgilio reyes ch 8 exercises

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12 cost of leasehold improvements 5,000,000.00

/ life 50.00 100,000.00
remaining term 40.00 years

total cost to depreciate for 40 years 4,000,000.00

annual method
5,000,000-4,000,000 1,000,000.00
/40 25,000.00

lump sum 5,000,000.00

13
accrual cash
sales
livestock and farm products raised 800,000.00 800,000.00
livestock and farm products purchased 200,000.00 200,000.00
old farm tractor 50,000.00 50,000.00
1,050,000.00 1,050,000.00

cost of livestock and farm products

purchased 120,000.00 120,000.00
Book Value of farm tractor 20,000.00 20,000.00
increase in inventory july 4,000.00
Gross Income 914,000.00 910,000.00

operating expenses 300,000.00

Net income 614,000.00

14 accrual cash
sale of livestock and farm products
raised 900,000.00 900,000.00
purchased 300,000.00 300,000.00
1,200,000.00 1,200,000.00
Sheet1

Income from services and from other sources

posted 11 Sept 2012, 00:39 by atty. sharon millan

virgilio reyes ch 9 exercises

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15 for services rendered
cash 100,000.00
property (fmv) 50,000.00 150,000.00

16 if fmv is 2,300,000 2,300,000.00

if fmv cannot be established 200,000.00

17 gross insome 20,000.00

18 gross income 2011 50,000.00

gross income 2012 6,000.00

19 gross income in 2011 40,000.00

gross income in 2012
40000x85% 34,000.00
40000-34000 6,000.00

20 gross income in 2012 100,000.00

21 gross income 180,000.00

22 no write off none

23 gross income in 2012 on bad debt recovery 15,000.00

24 no tax benefit none

25 gross income in 2012 on bad debt recovery 20,000.00

26 gross income in 2012 on bad debt recovery 12,000.00

27 gross income from tax refunds

refund of donors tax 2,000.00
refund of Real estate tax 12,000.00
Sheet1

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