For numbers 1 to 2

KAHASOL CORPORATION had the following items of expense and expenditures in 2020:
Purchase of equipment (paid in cash) P 200,000
Freight on purchase of equipment (paid in cash) 20,000
2020 salaries expense paid this period (cash expenses) 50,000
Supplies bought in 2019, half was used in 2020 16,000
Depreciation expense on property 24,000
2020 expenses, not paid this period (accrued expense) 12,000
2021 expenses, paid this period (prepaid expenses) 18,000
1. How much is the total deductions for cash basis of accounting?
a. 76,000
b. 90,000
c. 40,000
d. 102,000
2. How much is the total deductions for accrual basis of accounting?
a. 102,000
b. 90,000
c. 56,000
d. 46,000

For numbers 3 to 7
Miss Dona Emiliano leases an office space from Tower Realty. The lease contract specified a P
100,000 monthly rent over a period of 3 years. An advanced three-month payment is required which
is broken down as follows:

First month of lease P 100,000

Last month of lease 100,000
Security deposit 100,000
Total initial payment, excluding taxes P 300,000

3. How much is the rent expense to be recorded by the VAT registered lessee assuming that the
lessor is VAT registered?
a. 110,000
b. 100,000
c. 300,000
d. 200,000
4. How much is the withholding tax to be remitted by the VAT registered lessee assuming that
the lessor is VAT registered?
a. 5,000
b. 0
c. 10,000
d. 15,000
5. How much is the payment due to the non-VAT lessor assuming that the lessee is VAT
registered?
a. 300,000
b. 312,000
c. 314,000
d. 290,000
 6. How much is the payment due to the non-VAT lessor assuming that the lessee is non-VAT
registered?
a. 112,000
b. 290,000
c. 300,000
d. 288,000
7. How much is the withholding tax to be remitted by the non-VAT lessee assuming that the
lessor is non-VAT registered?
a. 12,000
b. 5,000
c. 10,000
d. 50,000

For numbers 8 to 12
A VAT registered taxpayer charged P 78,400 to a client for rental.
8. How much is the gross sales?
a. 0
b. 78,400
c. 70,000
d. 8,400
9. How much is the output VAT?
a. 8,400
b. 9,408
c. 0
d. 7,500
10. The collection of the rental is recorded by crediting
a. Rent income 78,400
b. Rent income 70,000
c. Output VAT 9,408
d. Rent income 87,808
11. How much is subject to regular tax?
a. 78,400
b. 70,000
c. 87,808
d. 62,500
12. Assuming the taxpayer is non-VAT, how much is subject regular tax?
a. 62,500
b. 87,808
c. 70,000
d. 78,400

For numbers 13 to 15
WAHAHAK INC,. a non-VAT domestic corporation, reported the following:

Rental income, net of 5% P 475,000

Professional fees, net of 10% 360,000
Interest income, net of 20% final tax 40,000
Dividends from domestic corporation 10,000
Business expenses 500,000
 13. How much is the total gross receipts?
a. 835,000
b. 885,000
c. 950,000
d. 900,000
14. How much is the final tax?
a. 12,000
b. 10,000
c. 0
d. 50,000
15. How much is the income tax still due/ (refund)?

TAXABLE INCOME PER YEAR INCOME TAX RATE

P 250,000 and below 0%
Above P 250,000 to P 400,000 20% of the excess over P 250,000
Above P 400,000 to P 800,000 P 30,000 + 25% of the excess over P 400,000
Above P 800,000 to P 2,000,000 P 130,000 + 30% of the excess over P 800,000
Above P 2,000,000 to P 8,000,000 P 490,000 + 32% of the excess over P 2,000,000
Above P 8,000,000 P 2,410,000 + 35% of the excess over P 8,000,000
a. 30,000
b. (35,000)
c. 55,000
d. 120,000

For numbers 16 to 17
A VAT taxpayer collected a total of P 55,000 cash for services rendered, net of P 1,000 withheld tax
by the client evidenced by a BIR Form 2307.

16. How much is the invoice price?

a. 55,000
b. 50,000
c. 62,000
d. 56,000
17. How much is the gross receipt?
a. 50,000
b. 62,000
c. 56,000
d. 62,000

A VAT taxpayer collected P 85,600 rental from a lessee who withheld 5% creditable withholding tax.

18. How much is the rent income to be credited?

a. 85,600
b. 89,600
c. 80,000
d. 0
19. How much is the output VAT?
a. 4,000
 b. 9,600
c. 13,600
d. 0
20. How much is the cash to credited by the lessee?
a. 85,600
b. 0
c. 80,000
d. 89,600

21. PABAHAY COMPANY, a resident business, renders services to Mr. Wing, a resident person who
is not engaged in business.

Identify the statuary taxpayer and the type of consumption tax.

a. PABAHAY COMPANY – Business tax
b. Mr. Wing – VAT on importation
c. Mr. wing – Business tax
d. PABAHAY COMPANY – VAT on importation

22. S1. Consumption tax is a tax levied upon business.

S2. The sale by non-resident persons in the Philippines is exempt from consumption tax.
S3. Business tax is a form of consumption tax.
S4. Consumption tax is a form of business tax.
a. Only one statement is false
b. Two statements are true
c. Three statements are true
d. Only one statement is true
e. All are false
f. All are true

23. S1. Consumption tax is more consistent with the ability to pay theory rather than the benefit
received theory.
S2. The sale by resident in the Philippines is subject to consumption tax.
S3. Non-resident sellers are exempt from consumption taxes on their domestic sales.
S4. Domestic sellers pay consumption tax to the government.
a. Only one statement is false
b. Two statements are true
c. Three statements are true
d. Only one statement is true
e. All are false
f. All are true

24. S1. Business tax is imposed on the sales of sellers which is the purchases made by the buyers.
S2. Resident foreigners are not subject to VAT on importation.
S3. All agricultural or aquaculture inputs are VAT-exempt.
S4. The sale of processed agricultural products is vatable.
a. Three statements are true
b. Two statements are correct
c. One statement is incorrect
d. All are true
 e. Three are not correct

25. S1. The final withholding VAT on importation of services is payable even by those not
engaged in business.
S2. The VAT on importation and the final withholding VAT can be claimed as Input VAT
creditable against Output VAT.
S3. In economic reality, the VAT on importation and the final withholding VAT are taxes paid
by non-resident sellers.
S4. VAT is a deductible tax.
a. S1, S2, S4 are true
b. S2, S4 are false
c. All statements are true
d. S1 and S2 are false
e. One statement is true
f. One statement is false
g. S1 is only the false statement
h. All statements are false

For numbers 26 to 28
The records of Don Mondragon show the following for 2020:

Business income, before P 320,000 business expenses P 560,000

Rental income, net 5% withholding tax 95,000
Dividend income from a domestic corporation 20,000
Winnings from Phil. Charity Sweepstake Office 400,000

Other sales transactions:

Factory equipment:
Selling price P 200,000
Cost in 2014 300,000
Accumulated depreciation 60,000

Land used as parking lot:

Selling price 300,000
Cost in 2016 180,000

Jewelry:
Selling price 250,000
Cost in 2018 180,000

Investment in bonds:
Selling price (June 2020) 300,000
Cost in October 2019 310,000

Unused lot:
Selling price 800,000
Cost in 2017 900,000

Shares traded in the stock exchange:

Selling price 220,000
Cost in 2018 300,000

Shares not-traded in the stock exchange:

Selling price 300,000
Cost in 2019 180,000

26. How much is the final tax?

a. 75,000
b. 66,000
c. 82,000
d. 44,500
27. How much is the capital gains tax?
a. 90,000
b. 82,500
c. 1,320
d. 66,000
28. How much is the stock transaction tax?
a. 1,800
b. 1,320
c. 6,600
d. 0

29. S1. The VAT on importation is a business tax.

S2. The final withholding VAT is a business tax.
S3. The VAT on importation is 12% of the value added on importation.
S4. The VAT on importation is 12% of the receipts from the sale of services abroad.
a. S1 is true
b. All statements are true
c. S2, S4 are false
d. S3 is true
e. All are true
f. S2 is true

30. S1. The importation of ingredients which are intended for the manufacture of goods for human
consumption is VAT-exempt.
S2. The importation of professional instruments and implements in commercial quantities is
VAT-exempt.
S3. The importation of equipment, machinery and spare parts for marine vessels are VAT-
exempt.
S4. The importation of any agricultural or marine products is VAT exempt.
a. All are true
b. Three statements are true
c. Two statements are false
d. One statement is false
e. S1, S3 are true
f. One statement is true which is S4
g. Three statements are false
For numbers 31 to 33
Christine Abanaga imported a sports car from the US for personal use. She acquired house and lot
from her husband after their marriage. The following shows details of the charges of the importation:

Purchase price $ 50,000

Insurance in transit 600
Freight 800
Total invoice price $ 51,300

Arrastre P 8,500
Bank charge 6,000
Wharfage dues 900
Brokerage dues 90,000
Custom’s documentary stamp 265
Import processing fee 250
Total other charges P 105,815

The relevant exchange rate per Bureau of Customs Memorandum Circular is P45:$1. The importation
is subject to P 683,510 excise tax and 30% tariff rate.

31. How much is the customs duties?

a. 685,550
b. 692,550
c. 693,900
d. 692,650
32. How much is the landed cost?
a. 3,796,325
b. 3,795,475
c. 3,791,655
d. 3,790,375
33. How much is the VAT on importation?
a. 454,645
b. 454,845
c. 455,559
d. 455,959

34. S1. VAT is non-deductible.

S2. Stock transaction tax is non-deductible.
S3. Percentage tax is deductible.
S4. Excise tax on the privilege to transfer is deductible.
a. All statements are correct
b. S1, S4 are only true statements
c. All are false
d. S2 is the only the true statement
e. Three statements are true
f. Two statements are false

For numbers 35 to 40
Mr. Veloso, a proprietor of a furniture shop, recorded the following income statement in 2020:
Net sales of finished goods, net of P 18,000 CWTs P 2,382,000
Sales of scraps and trimmings 200,000
Total Sales/Revenues/Receipts/Fees P 2,582,000
Less: Cost of Sales or services 1,200,000
Gross income from Business P 1,382,000
Add: Other income
Dividend Income P 12,000
Gain from sale of stocks, net of capital gains tax 68,000
Interest Income from deposits 16,000
Gain on sale of machinery held for 6 years 40,000
Gain on sale of bonds held for 2 years 20,000
Interest income from bonds 14,000
Unrealized gain – Financial asset - FVTPL 50,000
Interest income from Singaporean bank 23,000 243,000
Total Income P 1,139,000
Less: Administrative and selling expenses 600,000
Net income P 539,000

Based on the holding period rule:

If the capital asset is held by an individual taxpayer for a period of:
 Not more than one year – 100% of the capital gain or loss is recognized.
 More than one year – 50% of the capital gain or loss is recognized.

TAXABLE INCOME PER YEAR INCOME TAX RATE

P 250,000 and below 0%
Above P 250,000 to P 400,000 20% of the excess over P 250,000
Above P 400,000 to P 800,000 P 30,000 + 25% of the excess over P 400,000
Above P 800,000 to P 2,000,000 P 130,000 + 30% of the excess over P 800,000
Above P 2,000,000 to P 8,000,000 P 490,000 + 32% of the excess over P 2,000,000
Above P 8,000,000 P 2,410,000 + 35% of the excess over P 8,000,000

35. How much is the net taxable net income?

a. 864,000
b. 860,000
c. 887,000
d. 854,000
36. How much is the income tax due and payable?
a. 149,200
b. 138,100
c. 156,100
d. 148,000
37. How much is the business tax?
a. 42,000
b. 312,000
c. 44,610
d. 78,000
38. How much is the total taxes paid by Mr. Veloso?
a. 216,100
 b. 234,100
c. 225,000
d. 215,300
39. If the taxpayer opted to use the 8% commuted tax, how much is his income tax due?
a. 0
b. 194,960
c. 193,120
d. 193,920
40. If the taxpayer opted to use the 8% commuted tax instead of the regular income tax option,
how much is his tax savings if any?
a. 38,860
b. 0
c. 21,140
d. 22,180

41. S1. The transport services of an international carrier is exempt from VAT.
S2. Agricultural cooperatives and electric cooperatives are exempt from VAT.
S3. The sale of commercial lots where the selling prices do not exceed P 1,991,500 a unit is
exempt.
S4. Bookstores are totally exempt from VAT.

a. Two statements are true

b. S1 and S4 are false
c. Two statements are false
d. Three statement are false
e. Three statements are true
f. S3 is only the true statement

42. S1. Fruit shake is vatable.

S2. Boiled eggs are exempt.
S3. Cooked rice is vatable.
S4. Cotton is exempt.

a. One statement is false

b. Three statements are true
c. Two statements are false
d. S3 is false
e. S4 is true

43. Betani Hospital reported P 20,000,000 gross receipts from patient service revenue and an
additional P 10,000,000 from other accessory hospital services which includes P 5,000,000
sales of medicine. What is the amount subject to business tax?
a. 0
b. 5,000,000
c. 30,000,000
d. 35,000,000
44. A printing press had the following revenues and collections during the month:

Revenues Collection
Books P 200,000 P 180,000
Advertising magazines 250,000 160,000
Election campaign materials 700,000 400,000
Tarp 80,000 80,000
Total P 1,240,000 P 810,000
a. 780,000
b. 480,000
c. 640,000
d. 1,030,000

45. Malakas Shipping Company leases two of its ferry boats to Mactan Superferries, a domestic
transport company. Which is correct?
a. The rental income of Malakas is exempt from business tax
b. The gross receipt of Mactan on transport of passengers is exempt from business tax.
c. The gross receipt of Mactan on transport of cargoes is exempt from business tax
d. Both parties are vatable.

46. Assuming that Malakas Shipping Company in the immediately preceding problem is a non-
resident lessor, which is correct?
a. The rental income of Malakas is subject to final withholding VAT.
b. The gross receipt of Mactan on transport of passengers is exempt.
c. The gross receipt of Mactan on transport of cargoes is exempt.
d. Both parties will be required to pay the VAT.

47. Don Chick is a food franchise with most food menus offering chicken as an ingredient. Don
Chik contracted Mr. Barako to produce the chicken needs of its entire food franchise. For
quality control purposes, Don Chik gives Mr. Barako the chicks. Mr. Barako raises the chicks for
40 days, then delivers them to Don Chick. The latter paid the former P 400,000 for the first
delivery of chickens. Which is correct?
a. Don Chick is exempt while Mr. Barako is taxable to business tax
b. Mr. Barako is exempt from business tax
c. Both are exempt
d. Both are taxable

48. WATAHH Credit Cooperative transacts business only with members. It had the following
receipts during the month:

Interest income from members P 210,000

Rent income from properties 50,000

Compute the amount subject to business tax.

a. 0
b. 50,000
c. 210,000
d. 260,000
49. A bus operator had the following receipts during the month:

Passengers P 140,000
Cargoes 10,000
Total 150,000

Amount subject to business tax is?

a. 150,000
b. 0
c. 140,000
d. 10,000

50. A domestic airliner had the following receipts during the month:

Passenger fares P 5,000,000

Cargoes, mails and excess baggage 2,000,000

Amount subject to business tax is?

a. 0
b. 5,000,000
c. 7,000,000
d. 2,000,000
51. A non-VAT taxpayer made the following sales during the year:

Domestic sales P 100,000

Export sales 120,000

Amount subject to business tax is?

a. 120,000
b. 220,000
c. 0
d. 100,000

52. In relation to previous question, how much is the business tax?

a. 100,000
b. 3,000
c. 6,600
d. 12,000
e. 120,000
f. 220,000

53. A VAT-taxpayer made the following sales during the year:

Domestic sales P 100,000

Export sales 120,000

Amount subject to business tax is?

a. 220,000
 b. 100,000
c. 0
d. 120,000

54. In relation to previous question, how much is the business tax?

a. 26,400
b. 12,000
c. 0
d. 14,000
e. 220,000
f. 100,000

55. A non-VAT recreational center has a senior citizen member. The normal rate for non-senior
citizen members is P 2,000 per month. How much shall be billed to senior citizen?
a. 1,429
b. 1,600
c. 1,786
d. 1,792
56. A VAT-registered real estate lessor leases a residential house to a family of five with two
senior citizens. The house monthly rental is P 10,000 exclusive of VAT. Compute the output
VAT to be billed.
a. 1,200
b. 720
c. 0
d. 480
57. KAHAGO Company, a VAT registered taxpayer, purchased P 400,000 worth of goods and sold
the same for P 800,000. Assuming that the business operation is limited to Philippine
residents, what is the total business tax it will report on its sales?
a. 24,000
b. 48,000
c. 96,000
d. 0
58. Assuming that the purchases were imports and the sales were export, compute respectively
the business tax and the total consumption tax.
a. 0; 48,000
b. 24,000; 144,000
c. 24,000; 72,000
d. 144,000; 96,000
59. A business wants to make a P 10,000 profit from the sale of an inventory costing P 30,000.
The business is subject to 3% percentage tax. At what amount shall the business invoice the
sale?
a. 38,800
b. 41,237
c. 41,200
d. 40,000
60. A business taxpayer purchased goods worth P 120,000 from non-residents and sold goods
worth P 140,000 for P 180,000. What is the concept of “value added” for VAT purposes?
a. 80,000
b. 120,000
 c. 200,000
d. 140,000
e. 60,000
61. In the previous question, what is the basis of percentage tax?
a. 120,000
b. 200,000
c. 240,000
d. 180,000
62. Assuming the same data in the above problem, what is the basis of the VAT on importation?
a. 80,000
b. 180,000
c. 120,000
d. 140,000
e. 200,000
63. Mr. Silva imported P 300,000 equipment for business use and a P 1,200,000 car for personal
use. What is the amount subject to VAT on importation?
a. 1,500,000
b. 1,200,000
c. 300,000
d. 0

64. S1. Excise tax on the privilege to do business is a proportional tax.

S2. Value added tax is an indirect tax.
S3. VAT is a graduated tax.
S4. Business tax is a fiscal tax.

a. Two statements are incorrect

b. Three statements are false
c. Two statements are true
d. S3 and S4 are both true
e. S2 is the only true statement
f. One statement is false

65. The sale of adjacent dwellings to different buyers shall be aggregated as one.
a. True
b. False
c. Maybe
d. Crush kaba ng crush u?

For numbers 66 to 67
66. A certain taxpayer paid the following bill from a VAT registered supplier of office supplies. Half
of the office supplies were used in operation during the period:
Selling price P 400,000
Plus: Output VAT 48,000
Less: Withholding tax (1%) 4,000
Net cash due P 444,000
What is the deductible supplies expense assuming the taxpayer is a VAT-taxpayer?
a. 198,000
b. 200,000
 c. 400,000
d. 408,000

67. What is the deductible supplies expense assuming the taxpayer is a non-VAT-taxpayer?
a. 224,000
b. 198,000
c. 200,000
d. 400,000

68. The non-VAT taxpayer withheld 5% creditable withholding tax on rental payments to various
VAT-registered lessors. The total taxes withheld were P 5,600. What is the deductible expense
of rental expense?
a. 56,000
b. 100,000
c. 112,000
d. 124,440

For numbers 69 to 70
69. ZARAGOZA Company received a bill for P 27,440 from a non-VAT service provider. The
payment for the service is subject to 2% creditable withholding tax. How much is the
deductible expense if it is a non-VAT?
a. 0
b. 26,891
c. 27,440
d. 28,000

70. If the ZARAGOZA is a non-VAT taxpayer, what respectively is the withholding tax and the
amount of cash to be paid by the company to the service provider?
a. 0; 27,440
b. 548.80; 26,891.20
c. 560, 27,440
d. 537.82; 26,353.18