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FEU-MAKATI- IABF

S U B J E C T: INCOME TAXATION 2ND


SEMESTER
,SY 2012-2013
MIDTERM EXAMS
NAME_______________________ANSWER KEY_________________ I.D. NO.________________
GENERAL INSTRUCTIONS:
MATCHING TYPE-WRITE THE LETTER (OF THE DEFINITION) OPPOSITE THE TERM
MULTIPLE CHOICE-ENCIRCLE THE LETTER CORRESPONDING TO YOUR ANSWER
_______________________________________________________________________________
PART I-OBJECTIVE TYPE
CHAPTER 5-EXCLUSION FROM GROSS INCOME
H______1. COMPENSATION OR DAMAGES
A______2.EXCLUSION FROM GROSS INCOME
G______3.DEVISE
B______4. NONTAXABLE COMPENSATION INCOME
F______5 BEQUEST
C______6. NONTAXABLE OTHER RECEIPTS
E______. GIFT
D ______! TAX EXEMPT CONTRIBUTIONS
A______ITEMS OR RECEIPTS NOT INCLUDED IN THE DETERMINATION OF THE TAXABLE
INCOME BECAUSE THE LAW OR TREATY PROVIDES THAT THEY ARE EXEMPT FROM
INCOME TAX
B______EARNINGS THAT ARE COMPENSATION IN NATURE BUT W/C THE LAW SPECIFICALLY
EXCLUDES AS PART OF THE GROSS INCOME FOR TAXATION PURPOSES
C_____-AMOUNTS OR VALUES RECEIVED OTHER THAN COMPENSATION THAT ARE NOT
TAXABLE ACCORDING TO LAW
D_____GSIS, SSS, MEDICARE, PAG-IBIG AND UNION DUES ARE TAX-EXEMPT
CONTRIBUTIONS
E_____ANY PROPERTY LEGALLY AND VALIDLY TRANSFERRED FROM ONE PERSON TO
ANOTHER FOR FREE
F____PERSONAL PROPERTY TRANSFERRED FROM ONE PERSON TO ANOTHER BY WILL
G_____REAL PROPERTY TRANSFERRED FROM ONE PERSON TO ANOTHER BY WILL
H_____AMOUNTS RECEIVED, THROUGH ACCIDENT OR HEALTH INSURANCE OR UNDER
WORKMENS COMPENSATION ACTS, AS COMPENSATION FOR PERSONAL INJURIES OR
SICKNESS, PLUS THE AMOUNTS OF ANY DAMAGES RECEIVED WHETHER BY SUIT OR
AGREEMENT ON ACCOUNT OF SUCH INJURIES OR SICKNESS
CHAPTER 12"DEDUCTIONS FROM GROSS INCOME
I. MULTIPLE CHOICE #ENCIRCLE $OUR ANS%ER&
1. THIS REFERS TO INCOME RECEIVED OR EARNED BUT IS NOT TAXABLE AS INCOME
BECAUSE EXEMPTED BY LAW OR BY TREATY
A DEDUCTION FROM GROSS INCOME
B LIMITATION OF GROSS INCOME
C& EXCLUSION FROM GROSS INCOME
D NONE OF THE ABOVE
!. THESE ARE SUBTRACTED FROM GROSS INCOME TO DERIVE TAXABLE NET INCOME
A& DEDUCTION FROM GROSS INCOME
B LIMITATION OF GROSS INCOME
C EXCLUSION FROM GROSS INCOME
D NONE OF THE ABOVE
". FOR BAD DEBTS TO BE DEDUCTED FROM GROSS INCOME, THE FOLLOWING SHOULD
BE SATISFIED#
A DEBT ACTUALLY ASCERTAINED TO BE WORTHLESS
B CHARGED OFF WITHIN THE TAXABLE YEAR
C& BOTH CONDITIONS A& AND B& ABOVE SHOULD BE SATISFIED
$. THE % LIMIT ON INDIVIDUALS TAXABLE INCOME &BEFORE DEDUCTING CHARITABLE
CONTRIBUTION FOR DEDUCTIBILITY OF ORDINARY CHARITABLE CONTRIBUTIONS
A 'ERO
B (%
C 1(%
D& 1'(
E NONE OF THE ABOVE
(. THE % LIMIT ON CORPORATIONS TAXABLE INCOME &BEFORE DEDUCTING CHARITABLE
CONTRIBUTION FOR DEDUCTIBILITY OF ORDINARY CHARITABLE CONTRIBUTIONS
A 'ERO
B& 5(
C 1(%
D 1)%
E NONE OF THE ABOVE
*. THE AMOUNT OF PREMIUM ALLOWED PER FAMILY DURING THE TAXABLE YEAR FOR
HEALTH AND/OR HOSPITALI'ATION INSURANCE FOR DEDUCTION FROM GROSS INCOME
A P$,+))
B& P2)4''
C 'ERO
D NONE OF THE ABOVE
,. IN RELATION TO NO. * ABOVE, THE ADDITIONAL PROVISION SAYS THAT THE GROSS
FAMILY INCOME SHALL BE
A NOT MORE THAN P!)),))) FOR THE TAXABLE YEAR
B& NOT MORE THAN P25')''' FOR THE TAXABLE $EAR
C NOT MORE THAN P")),))) FOR THE TAXABLE YEAR
D NONE OF THE ABOVE
+. AS A GENERAL RULE, SALARY EXPENSES ARE ALLOWED AS DEDUCTIONS FROM GROSS
BUSINESS INCOME ONLY IF
A SALARY HAS BEEN PAID/ACCRUED
B SALARY IS IN ACCORDANCE WITH MINIMUM WAGE LAW
C& CORRESPONDING %HT HAS BEEN DEDUCTED AND REMITTED TO THE BIR
-. THE SECRETARY OF FINANCE PROVIDES THE FOLLOWING CEILINGS FOR
REPRESENTATION EXPENSES
A& * ( FOR TAXPA$ERS ENGAGED IN SALE OF GOODS+PROPERTIES, 1( OF NER
REVENUE FOR TAXPA$ERS ENGAGED IN SALE OF SERVICES
B 1% FOR TAXPAYERS ENGAGED IN SALE OF GOODS/PROPERTIES. / % OF NET REVENUE
FOR TAXPAYERS ENGAGED IN SALE OF SERVICES
1).THE OPTIONAL STANDARD DEDUCTION ON INDIVIDUAL IS-
A $)% OF TAXABLE INCOME
B $)% OF BUSINESS AND/OR PROFESSIONAL INCLUDING COMPENSATION INCOME
C& 4'( OF BUSINESS AND+OR PROFESSIONAL INCOME
D 1)% OF BUSINESS AND/OR PROFESSIONAL EXCLUDING COMPENSATION INCOME
11.OPTIONAL STANDARD DEDUCTION IS ALLOWED TO
A& RESIDENT ALIEN
B NON-RESIDENT ALIEN ENGAGED IN TRADE OR BUSINESS
C NON-RESIDENT ALIEN NOT ENGAGED IN TRADE OR BUSINESS
D NON-RESIDENT FOREIGN CORPORATION
MULTIPLE CHOICE
I. TRUE OR FALSE #ENCIRCLE $OUR ANS%ER&
1. OPTIONAL STANDARD DEDUCTION IS THE SAME AS ITEMI'ED DEDUCTION
A TRUE
B& FALSE
!. ORDINARY CHARITABLE CONTRIBUTIONS ARE SUBJECT TO LIMITATION AS TO THE
AMOUNT DEDUCTIBLE FROM GROSS INCOME
A& TRUE
B FALSE
". SPECIAL CHARITABLE CONTRIBUTIONS ARE DEDUCTIBLE IN FULL FROM GROSS
INCOME
A& TRUE
B FALSE
$. ABC CORP. BOUGHT 1)) SHARES OF XY' CORP. AT P1)) PER SHARE. SIX MONTHS
LATER, DUE TO AN UNFAVORABLE MARKET CLIMATE, THE SHARES WERE SELLING AT P!(
PER SHARE. ABC CORP. DID NOT SELL THE SHARES. THE SHRINKAGE IN VALUE OF P,,())
IS DEDUCTIBLE.
A TRUE
B& FALSE
(. INDEMNITY IS COMPENSATION FOR DAMAGES OR LOSS SUSTAINED. LIFE INSURANCE
CONTRACT IS A CONTRACT OF INDEMNITY.
A& TRUE
B FALSE
*. ONE OF THE RE0UISITES FOR THE DEDUCTIBILITY OF INTEREST EXPENSE IS THAT THE
INTEREST MUST HAVE BEEN STIPULATED IN WRITING
A& TRUE
B FALSE
,. ANNA BORROWED P!),))) FROM HER SISTER KAREN WITH INTEREST. AT THE END OF
THE YEAR, ANNA PAID THE PRINCIPAL PLUS INTEREST OF P",))). THE INTEREST OF
P",))) IS ALLOWABLE DEDUCTION.
A TRUE
B& FALSE
+. MR. X, WHO IS MAJORITY STOCKHOLDER AND PRESIDENT OF MAGULANG CORP.,
RECEIVES AN ANNUAL SALARY OF P1,))),))). PRESIDENTS OF CORPORATIONS SIMILAR
CORPORATIONS OF SAME SI'E, SAME VOLUME AND SAME AREA RECEIVE AN AVERAGE OF
P()),))). THE DIFFERENCE OF P()),))) MAYBE DISALLOWED AS A DEDUCTION.
A& TRUE
B FALSE
-. SALARIES PAID BY EMPLOYERS TO EMPLOYEES WHO ARE ABSENT IN THE MILITARY,
NAVAL OR OTHER SERVICE OF THE GOVERNMENT, BUT INTEND TO RETURN AFTER THE
TOUR OF DUTY, ARE ALLOWABLE DEDUCTIONS
A& TRUE
B FALSE
1). EXPENSES INCURRED FOR THE REPAIR OF AN OFFICE BUILDING TO PREVENT
LEAKING ARE ALLOWABLE DEDUCTIONS
A& TRUE
B FALSE
11. REPAIRS IN THE NATURE OF REPLACEMENT TO THE EXTENT THAT THEY ARREST
DETERIORATION AND PROLONG THE LIFE OF THE PROPERTY ARE CAPITAL
EXPENDITURES, AS DIFFERENTIATED FROM MAINTENANCE AND INCIDENTAL REPAIRS
A& TRUE
B FALSE
1!. NON-RESIDENT ALIENS NOT ENGAGED IN TRADE OR BUSINESS WITHIN THE PHIL.
AND NON-RESIDENT FOREIGN CORPORATION ARE TAXED ON THE BASIS OF THEIR GROSS
INCOME, AND NOT NET INCOME
A& TRUE
B FALSE
1". A BUSINESS EXPENSE IS CONSIDERED ORDINARY WHEN IT IS COMMONLY INCURRED
IN THE TRADE OR BUSINESS OF THE TAXPAYER
A& TRUE
B FALSE
1$. AN EXPENSE IS CONSIDERED NECESSARY IF IT IS APPROPRIATE AND HELPFUL TO THE
TAXPAYERS BUSINESS
A& TRUE
B FALSE
1(. A BRIBE GIVEN TO OBTAIN PROTECTION FROM ARREST AND PROSECUTION IS AN
ALLOWABLE DEDUCTION
A TRUE
B& FALSE
1*. PAYMENTS TO SECURE POLITICAL INFLUENCE TO OBTAIN FAVORABLE PUBLIC
CONTRACTS IS ALLOWABLE DEDUCTION
A TRUE
B& FALSE
1,.SALARIES OF STAFF IN THE OPERATION OF ILLEGAL HORSE-BETTING BUSINESS ARE
ALLOWABLE DEDUCTIONS
A& TRUE
B FALSE
1+. FOR INCOME TAX PURPOSES, A TAXPAYER MAY DEDUCT FROM HIS GROSS INCOME A
LOWER AMOUNT OR NOT CLAIM ANY DEDUCTION AT ALL
A& TRUE
B FALSE
1-. FOR INDIVIDUAL TAXPAYERS EARNING PURELY COMPENSATION INCOME, ONLY
PERSONAL AND ADDITIONAL EXEMPTIONS AND MANDATORY CONTRIBUTIONS &SSS/GSIS,
PHILHEALTH, PAG-IBIG AND UNION DUES ARE ALLOWED TO BE DEDUCTED AND IF
APPLICABLE, PREMIUM PAYMENTS ON HEALTH AND/OR HOSPITALI'ATION INSURANCE
A& TRUE
B FALSE
!). PAYMENTS FOR NON-PHYSICAL INJURIES PROHIBIT THAT IT SHALL INCLUDE A PROFIT
AS A MATTER OF SANCTION
A& TRUE
B FALSE
!1. ALL GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS , EXCEPT THOSE
EXPRESSLY EXEMPTED, ARE RE0UIRED BY TAX CODE TO PAY INCOME TAXES
A& TRUE
B FALSE
!!. RETIREMENT BENEFITS RECEIVED BY GOVERNMENT EMPLOYEES FROM GSIS AND BY
PRIVATE EMPLOYEES FROM SSS ARE ARE EXEMPT FROM TAXATION
A& TRUE
B FALSE
!". WHILE THE INCOME OF FOREIGN GOVERNMENTS FROM OPERATION OF VESSELS IN
THE PHILIPPINES IS TAXABLE, ITS INCOME FROM INTEREST ON DEPOSITS IN PHIL. BANKS
IS NOT TAXABLE.
A& TRUE
B FALSE
!$. THE VALUE OF THE CORPUS OR PROPERY RECEIVED AS A GIFT, OR UNDER A WILL, OR
TESTAMENT OR THROUGH LEGAL SUCCESSION IS EXEMPT FROM INCOME TAX
A& TRUE
B FALSE
!(. UNDER THE HUSBANDS GENERAL OBLIGATION OF SUPPORT, NEITHER ALIMONY NOR
ALLOWANCE BASED ON SEPARATION AGREEMENT IS TAXABLE INCOME
A& TRUE
B FALSE
!,.UNLESS EXEMPTED BY LAW, INTERESTS RECEIVED BY A TAXPAYER, WHETHER OR NOT
USURIOUS, ARE TAXABLE
A& TRUE
B FALSE
!+. THE MAIN CRITERION FOR COMPENSATION FOR SERVICES TO BE CONSIDERED
INCOME IS THAT SERVICES MUST BE RENDERED AND THAT PAYMENT MUST BE MADE
FOR SUCH SERVICES
A& TRUE
B FALSE
!-. REVENUE IS TO THE GOVERNMENT AS INCOME IS TO A PERSON OR CORPORATION
A& TRUE
B FALSE
"). INCOME IS ALWAYS IN THE FORM OF MONEY AND CAN NOT TAKE ANY OTHER FORM
A TRUE
B& FALSE
"1. THE OPTIONAL STANDARD DEDUCTION IS AN OPTION AVAILABLE ONLY TO
INDIVIDUAL &NOT CORPORATE TAXPAYERS
A TRUE
B& FALSE
"!.THERE IS NO DETERMINATION OF INCOME UNTIL THE SERVICE IS RENDERED
A& TRUE
B FALSE
"". THE RULE ON COMPENSATION INCOME APPLIES TO ALL TAXPAYERS INCLUDING NON-
RESIDENT ALIENS NOT ENGAGED IN BUSINESS IN THE PHILIPPINES
A TRUE
B& FALSE
"". ANY AMOUNT RECEIVEDFOR ANY CAUSE BETOND THE CONTROL OF OFFICIAL OR
EMPLOYEE ARE TAX-EXEMPT
A& TRUE
B FALSE
"$. CONTRIBUTIONS TO SSS/GSIS, PHILHEALTH, PAG-IBIG AND UNIONS ARE EXCLUDED
FROM GROSS INCOME
A& TRUE
B FALSE
"(. NOT CONSIDERING THE PREMIUMS PAID, PROCEEDS OF LIFE INSURANCE POLICIES
PAID TO THE HEIRS OF THE HEIRS OR BENEFICIARIES ARE TAX-EXEMPT
A& TRUE
B FALSE
"-. WHILE THE BIR ALLOWS OPTIONAL STANDARD DEDUCTION, SUPPORTING
DOCUMENTS ARE STILL RE0UIRED
A TRUE
B& FALSE
III-MATCHING T$PE
X______1. ORDINAR$ CONTRIBUTIONS
A______2.DEDUCTIONS OR ALLO%ABLE DEDUCTIONS
B______3. REVENUE EXPENDITURES
%______4. SPECIAL CONTRIBUTIONS
C______5. CAPITAL EXPENDITURES
D111111*. ITEMI-ED DEDUCTIONS
V______. DEFINED CONTRIBUTION PLAN
E______!. GENERAL BUSINESS EXPENSES
F______.. ORDINAR$ EXPENSE
U______1'. DEFINED BENEFIT PLAN
G______11.NECESSAR$ EXPENSE
H______12. BUSINESS
T______13. PENSION PLAN
I______14. TRAVELLING EXPENSES
/______15. RENT EXPENSES
S_____16. DEVELOPMENT STAGE
0_____1. REPRESENTATION EXPENSES
L_____1!. INTEREST EXPENSE
R_____1.. DEVELOPMENT EXPENDITURES
M_____2'.BAD DEBTS EXPENSE
N_____21. CLAIM ASCERTAINED TO BE %ORTHLESS
Q_____22. EXPLORATION AND DEVELOPMENT EXPENDITURES
O_____23. DEPRECIATION EXPENSE
P_____24. DEPLETION EXPENSE
A_____-BUSINESS EXPENSES AND LOSSES INCURRED W/C THE LAW ALLOWS TO
REDUCE GROSS BUSINESS INCOME TO ARRIVE AT NET TAXABLE INCOME
B_____-ORDINAR$ RECURRING EXPENDITURES THAT PROVIDE BENEFITS TO THE
CURRENT ACCOUNTING PERIOD. AKA 1PERIOD COSTS2 BECAUSE THEY ARE RELATED
TO A PARTICULAR PERIOD OF TIME OF BUSINESS OPERATION
C_____-NON RECURRING EXPENDITURES RELATED TO THE AC0UISITION OF
DEPRECIABLE ASSETS TO BE USED IN THE BUSINESS BUT NOT FOR SALE, HAVING A
USEFUL LIFE OF SEVERAL YEARS. THEY PROVIDE CURRENT AND FUTURE BENEFITS IN
BUSINESS OPERATIONS
D_____SPECIFIC BUSINESS OPERATING EXPENSES ALLOWED BY THE TAX CODE TO BE
DEDUCTED FROM THE GROSS INCOME
E____ALL ORDINAR$ AND NECESSAR$ EXPENSES PAID OR INCURRED DURING THE
TAXABLE YEAR IN CARRYING ON OR W/C ARE DIRECTLY ATTRIBUTABLE TO THE
DEVELOPMENT) MANAGEMENT) OPERATION AND/OR CONDUCT OF THE TRADE,
BUSINESS OR EXERCISE OF A PROFESSION
F____IT IS REASONABLE AND COMMON TO THE PARTICULAR BUSINESS OF THE
TAXPAYER
G_____IT IS USEFUL OR HELPFUL TO THE BUSINESS
H_____ACTIVITY INTENDED TO MA0E A PROFIT. .CONNOTES REGULARIT$ IN
TRANSACTION THAT MIGHT RESULT IN PROFIT
I_____EXPENSES INCURRED %+IN AND OUTSIDE THE COUNTR$ WHILE A%A$ FROM
HOME IN THE PURSUIT OF TRADE, BUSINESS, OR PROFESSION. INCLUDE
TRANSPORTATION EXPENSES AND MEALS AND LODGING
/_____EXPENSES INCURRED FOR THE CONTINUED USE OR POSSESSION OF PROPERTY TO
W/C THE TAXPAYER HAS NOT TAKEN OR IS NOT TAKING TITLE TO OR IN W/C HE HAS NO
E0UITY OTHER THAN THAT OF A LESSEE, USER OR POSSESSOR
0____ENTERTAINMENT) AMUSEMENT AND RECREATION EXPENSES INCURRED OR
PAID DURING THE YEAR THAT ARE DIRECTLY RELATED TO THE DEVELOPMENT,
MANAGEMENT AND OPERATION OF THE THE TRADE, BUSINBESS OR PROFESSION OF THE
TAXPAYER
L_____COST OF MONE$ INCURRED W/IN A TAXABLE YEAR ON INDEBTEDNESS IN
CONNECTION WITH THE TAXPAYERS PPROFESSION,TRADE OR BUSINESS
M____CLAIM THAT BECOMES %ORTHLESS OR UNCOLLECTIBLE ARISING FROM
MONEY LENT OR FROM GOODS SOLD AND SERVICES RENDERED
N_____WHEN THE CREDITOR DETERMINED WITH REASONABLE DEGREE OF CERTAINTY
THAT THE CLAIM COULD NOT BE COLLECTED DESPITE THAT FACT THAT THE CREDITOR
TOOK REASONBLE STEPS TO COLLECT
O_____ALLOWANCE TO REDUCE THE USEFUL VALUE OF THE TANGIBLE FIXED ASSETS
RESULTING FROM WEAR AND TEAR AND NORMAL OBSOLESCENCE
P_____THE EXHAUSTION OF NATURAL RESOURCES LIKE MINES, OIL AND GAS WELLS
DUE TO PRODUCTION
Q_____EXPENSES PAID/INCURRED BEFORE THE DEVELOPMENT STAGE OF OF THE
MINE INTENDED TO ASCERTAIN THE EXISTENCE) LOCATION) EXTENT) OR QUALIT$ OF
ANY DEPOSIT OF ORE OR OTHER MINERAL
R_____EXPENDITURES PAID/INCURRED DURING THE DEVELOPMENT STAGE OF THE
MINE OR OTHER NATURAL DEPOSITS
S_____-BEGINS AT THE TIME DEPOSITS OR MINERAL ORES ARE SHOWN TO EXIST IN
SUFFICIENT COMMERCIAL 0UANTITY AND 0UALITY AND SHALL END UPON
COMMENCEMENT OF ACTUAL COMMERCIAL EXTRACTION
T_____FUND INTENDED TO PROVIDE RETIREMENT BENEFITS TO EMPLOYEES
U_____UNDER THIS PLAN, THE EMPLO$ER HANDLES AND MANAGES THE FUND,
BENEFITS THAT THE RETIREE WOULD RECEIVE ARE DEFINED AND BASED ON CERTAIN
PERCENTAGE OF THE SALARY OF THE EMPLOYEES ELIGIBLE TO THE BENEFIT PLAN
V_____UNDER THIS PLAN, TRUST FUND IS HANDLED B$ A THIRD PART$ CALLED THE
ADMINISTRATOR. THE LIABILITY OF THE EMPLO$ER IS TO CONTRIBUTE THE DEFINED
OR CONTRACTED PERIODIC CONTRIBUTION AS PER AGREEMENT WITH THE
ADMINISTRATOR
%_____CONTRIBUTIONS DEDUCTIBLE IN FULL
X_____CONTRIBUTIONS THAT ARE NOT DEDUCTIBLE IN FULL, SUB/ECT TO
LIMITATIONS
PART II-PROBLEM SOLVING
PROBLEM 31-OSD#INDIVIDUAL VS. CORPORATION&
X REPORTED THE FOLLOWING FOR THE PERIOD#
SALES P!,))),)))
COST OF SALES *)),)))
OPERATING EXPENSES !)),)))
REQUIRED4 COMPUTE FOR THE OPTIONAL STANDARD DEDUCTION ASSUMING X
IS
A& SOLE PROPRIETOR
B& CORPORATION
SOLUTION4
SOLE PROPRIETOR CORPORATION
SALES P!,))),))) P!,))),)))
LESS# COST OF SALES ) *)),)))
BASIS OF OSD !,))),))) 1,$)),)))
X OSD RATE $)% $)%
OSD P+)),))) P(*),)))
PROBLEM 32-ITEMI-ED DEDUCTIONS
MAHIRAP CORPORATION &ENGAGED IN SALE OF GOODS REPORTED THE FOLLOWING
INFORMATION#
SALES P$),))),)))
COST OF SALES "!,))),)))
OOERATING EXPENSE, INCLUSIVE OF REPRESENTATION
EXPENSE AMOUNTING TO P*)),))) WITH
PROPER DOCUMENTATION $,))),)))
REQUIRED4 COMPUTE FOR THE AMOUNT OF REGULAR ITEMI-ED DEDUCTION
SOLUTION4
OPERATING EXPENSE BEFORE REPRESENTATION EXPENSE P",$)),)))
&P$,))),)))-*)),)))
REPRESENTATION EXPENSE-ACTUAL P*)),)))
-LIMIT&P$),))),))) X .))( !)),)))&LOWER !)),)))
ALLOWABLE ITEMI'ED DEDUCTION P",*)),)))
PROBLEM 33-COMPENSATION FOR IN/URIES AND PENSIONS
WHILE WORKING, NITOY. ONE OF RGF CONSTRUCTON COMAPANYS WORKERS, DIED BYT
FALLING FROM THE 1)
TH
FLOOR OF THE BUILDING. THE COMPANY HELPED THE
WORKERS FAMILY WITH THE FOLLOWING#
MONTHLY SALARY P1),)))
DEATH BENEFITS 1)),)))
TERMINAL PAY (),)))
FUNERAL EXPENSE !),)))
CONTINOUS COMPENSATION AFTER
BURIAL FOR " MONTHS "),)))
REQUIRED4 COMPUTE FOR THE TOTAL DEDUCTIBLE EXPENSE
SOLUTION4
MONTHLY SALARY P1),)))
DEATH BENEFITS 1)),)))
TERMINAL PAY (),)))
COMPENSATION-CONTINOUS FOR " MOS. "),)))
TOTAL DEDUCTIBLE EXPENSE P1-),)))
PROBLEM 34-RENT EXPENSE
ON JULY "1, !)1!, KATRINA A CONTRACT OF LEASE WITH ABC BUILDERS REGARDING A
SPACE WITH THE STIPULATIONS THAT KATRINA SHOULD BE RESPONSIBLE IN PAYING THE
FOLLOWING#
MONTHLY RENT P$),)))
SHARE IN ANNUAL PROPERTY INSURANCE PREMIUM *,)))
SHARE IN ANNUAL REAL PROPERTY TAX ",)))
SHARE IN ANNUAL CITY SERVICES $+,)))
IF KATRINA USES ,)% OF THE SPACE FOR BUSINESS AND THE REMAINING ")% FOR
RESIDENCE,
REQUIRED4 HO% MUCH IS THE DEDUCTIBLE RENT EXPENSE TO BE REPORTED
FOR THE $EAR ENDING DECEMBER 31) 2'125
SOLUTION4
MONTHLY RENT &P$),))) X ,)% X (-FROM AUGUST TO DECEMBER !)1! P1$),)))
INSURANCE PREMIUM &P*,))) X ,)% X (/1!2 1,,()
REAL PROPERTY TAX &P",))) X ,)% X (/1!2 +,(
DEDUCTIBLE RENT EXPENSE P1$!,*!(
PROBLEM 35-LEASEHOLD IMPROVEMENT
LETTY SIGNED A 1)-YEAR LEASE CONTRACT TO OCCUPY A VACANT LOT FOR P$,))) A
MONTH. AS A PART OF THE LEASE AGREEMENT, LETTY CONSTRUCTED A RESTAURANT
BUILDING COSTING P1,!)),))) COMPLETED AT THE START OF THE LEASE CONTRACT.
THE BUILDING HAS AN ESTIMATED USEFUL LIFE OF 1! YEARS. AT THE END OF THE LEASE
CONTRACT, THE LANDLORD WILL OWN THE BUILDING.
REQUIRED4 COMPUTE FOR THE MONTHL$ DEDUCTIBLE EXPENSE
SOLUTION4
MONTHLY RENTAL EXPENSE P$,)))
MONTHLY DEPRECIATION&P1,!)),)))/1)/1! 1),)))
MONTHLY DEDUCTIBLE EXPENSE P1$,)))
PROBLEM 36-LEASEHOLD IMPROVEMENT
ON DECEMBER 1, !)11, MASARAP FOODS CO. SIGNED A 1)-YEAR LEASE CONTRACT TO
OCCUPY A VACANT LOT FOR P1),))) A MONTH. AS PART OF THE LEASE AGREEMENT THE
LESSEE CONSTRUCTED A RESTAURANT BUILDING COSTING P1,-(),))). THE BUILDING
WAS COMPLETED AND IMMMEDIATELY USED ON FEBRUARY !+, !)1!. THE BUILDING HAS
AN ESTIMATED USEFUL LIFE OF 1! YEARS WITH A SALVAGE VALUE OF P1)),))). AT THE
END OF THE LEASE CONTRACT, THE LANDLORD WILL OWN THE BUILDING.
REQUIRED4 COMPUTE FOR THE RELATED DEDUCTIBLE EXPENSE OF MASARAP
FOODS CO. IN 2'12.
SOLUTION4
RENT EXPENSE&P1),))) X 1! P1!),)))
ADD# DEPRECIATION EXPENSE&P1,-(),)))/-.,( X 1)/1! 1**,**,
DEDUCTIBLE EXPENSE IN !)1! P!+*,**,
PROBLEM 3-REPRESENTATION EXPENSE
A BUSINESS REPORTED A TOTAL NET REVENUE OF P1),))),))). THE ACTUAL
ENTERTAINMENT AND REPRESENTATION EXPENSES INCURRED IN CONNECTION WITH THE
CONDUCT OF BUSINESS AMOUNTED TO P*),))).
REQUIRED4 COMPUTE FOR THE DEDUCTIBLE AMOUNT OF ENTERTAINMENT AND
REPRESENTATION EXPENSE ASSUMING THAT THE BUSINESS IS
A& TRADING BUSINESS
B& SERVICE BUSINESS
SOLUTION4
A TRADING
P1),))),))) X .))(2 P5')'''#LIMIT&-LOWER THAN P*),)))&ACTUAL
B SERVICE BUSINESS
P1),))),))) X .)12 P1)),)))& LIMIT-HIGHER THAN P6')'''#CTUAL&-
LO%ER
PROBLEM 3!-DEDUCTIBLE CONTRIBUTION EXPENSE
THE NET INCOME BEFORE CONTRIBUTION OF GCF COMPANY, A DOMESTIC CORPORATION
IS P$)),))).
IT DONATED P"),))) TO A RELIGIOUS ORGANI'ATION.
REQUIRED4 COMPUTE FOR THE ALLO%ABLE CHARITABLE CONTRIBUTION
SOLUTION4
P$)),))) X (%2P2')''' LIMIT #LO%ER& THAN ACTUAL P"),)))
PROBLEM 3.-DEDUCTIBLE CONTRIBUTION EXPENSE
THE NET INCOME AFTER P1(,))) CONRIBUTION &TO AN ACCREDITED SOCIAL WELFARE
ORGANI'ATION OF A RESIDENT CITI'EN IS P1(),))).
REQUIRED4 COMPUTE FOR THE ALLO%ABLE CHARITABLE CONTRIBUTION
SOLUTION4
&P1(),))) 3 1(,))) X 1)%2P1*,())&LIMIT HIGHER THAN ACTUAL CC OF P15)'''.
PROBLEM 31'-INTEREST EXPENSE
A CORPORATION EARNED INCOME, INCLUSIVE OF P1)),))) INTEREST INCOME AND NET
OF INTEREST EXPENSE OF P+),))), AMOUNTING TO P",))),))).
REQUIRED4 COMPUTE FOR THE DEDUCTIBLE INTEREST EXPENSE
SOLUTION4
P+),)))-&""% X P1)),)))2P$,,)))
666666666END OF MT EXAMS6666666666
THE GREATEST CRIME THAT $OU CAN COMMIT AGAINST
$OURSELF AND $OUR LOVED ONES IS NOT DOING $OUR BEST.

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