Income taxation c4
A taxpayer filed his income tax return in October 28, 2018. The deadline for the return was April 15, 2018. If he has P40,000 net tax due, compute the penalties in the form of interest. A. P2,578 B. P2,611 C. P2,867 D. P4,296
A
Astercor, Inc. reported the following during the year: + P400,000 proceeds of life insurance of an officer where Antercor is the beneficiary (P600,000 still uncollected) + P800,000 interest income, exclusive of P200,000 uncollected and accrued interest + P300,000 increase in value of investment in stocks Compute the gross income under cash basis. A. P800,000 B. P1,000,000 C. P1,200,000 D. P1,400,000
A
Effective May 15, 2017, Tabuk, Inc. changed its fiscal year ending every April 30 to the calendar year. An adjustment return shall be filed covering the period A. May 1 to December 31, 2017 B. January 15 to December 31, 2017 C. January 1 to April 30, 2017 D. April 30 to December 31, 2017
A
In 2020, Mr. Marangley, a dealer of car, disposed a brand new sports utility vehicle (SUV) which costs P800,000 for P1,200,000, inclusive o under the following terms: July 1, 2020 - as down payment. P100,000 Monthly installment thereafter. 50,000 Mr. Marangley will choose whichever favourable permissible income reporting method for him. In the immediately preceeding problem, assuming Mr. Marangley is not a dealer of car, how much gross income is to be reported in 2020? How much gross income is to be reported in 2020? A. P400,000 B. P250,000 C. P116,667 D. P108,219
A
Income is recognized when received rather than when earned A. Cash basis B. Installment basis C. Accrual basis D. Deferred payment basis
A
T/F. All taxpayers can change their accounting period when there is a change in the nature of their business, but the BIR must be notified in all cases.
F
T/F. All taxpayers, small or large, are encouraged to file their income tax return through the EFPS system of the BIR.
F
T/F. An ordinary asset is defined to include all other assets other than capital assets.
F
T/F. Both active income and passive income do not require direct participation of the taxpayer in earning the income.
F
T/F. Capital gains arise from the sale, exchange, and other disposition of any assets.
F
T/F. Contract price is synonymous with selling price.
F
T/F. Non-filing and/or non-payment of tax is subject to penalties such as surcharges, interest, compromise, and imprisonment.
F
T/F. Only large taxpayer shall file under eFPS.
F
T/F. The accounting period of a deceased taxpayer shall be terminated on December 31 in the year of death.
F
T/F. The three tax schemes are mutually inclusive in coverage.
F
T/F. The withheld taxes on the income payments made by the taxpayers are tax credit against their income tax due.
F
T/F. There are three types of income tax return for each income tax scheme/
F
T/F. Under the percentage of completion method, gross income is reported based on the cash collections from the contract price.
F
Effective March 1, 2017, Jonah, Inc. changed its calendar year to a fiscal year ending every June 30. An adjustment return shall be filed covering the period A. March 1 to June 30, 2017 B. January 1 to June 30,2017 C. January 1 to March 1, 2017 D. January 1 to December 31, 2017
B
Hassan started raising swine for sale by purchasing 5 gilts and a boar at a total purchase price of P50,000 on January 2020. As of December 31, 2020, Hassan' herd grew to 15 guilts, 2 boars and 20 piglets. The total herd has a fair value of P196,000 when sold as is. During the year, Hassan earned P180,000 from selling piglets. How much should Hassan report as farming income in 2020? A. P326,000 B. P180,000 C. P146,000 D. P130,000
B
Income is recognized when earned regardless of when received A. Cash basis B. Accrual basis C. Installment method D. Percentage of completion
B
Initial payment means A. Downpayment B. Total collection within the year the installment sale was made. C. Installment payments, exclusive of downpayment, within the year the installment sale was made D. Total collections within one year from the date the installment sale was made.
B
Luccio accepted a P1,000,000 construction contract in early 2020. As of December 31, Luccio incurred total construction costs of P600,000 and estimates additional P200,000 to bring the project to completion. Per independent appraisal, the building is at its 80% stage of completion. Compute Luccio's 2020 construction income using the percentage of completion method. A. P40,000 B. P200,000 C. P160,000 D. P400,000
B
Merville is a dealer in real properties. Merville requires 20% downpayment, and the balance is payable over 36 monthly installments starting on the last day of the month following the month of sale. Merville sold properties in 2019 and 2020 with the terms as follows: + house and lot no. 1 was sold for P1,350,000 on November 11, 2019. + house and lot no. 2 was sold for P1,800,000 on July 5, 2020. Both parties were sold at a gross profit rate of 40% based on the selling price. Compute Merville's gross income subject to income tax in 2019 and 2020, respectively. A. P120,000; P720,000 B. P120,000; P864,000 C. P540,000; P864,000
B
Metersbonwe corporation started business on April 15, 2016 and opted to report income tax on a fiscal year ending October 31. Metersbonwe's first income tax return shall cover A. April 6 2016 to October 31, 2016 B. April 5, 2016 to October 31, 2016 C. April 5, 2016 to December 31, 2016 D. April 5, 2016 to April 5, 2017
B
Mrs. Julian started business on July 15, 2016. What should be the coverage of her 2016 income tax return? A. January 1 to July 15, 2016 B. July 15, 2016 to December 31, 2016 C. July 16, 2016 to July 15, 2017 D. January 1 to December 31, 2016
B
Oliver entered into a 40-year lease contract with Berna. Per agreement, Oliver will construct a building on Berna's lot and operate the same for 40 years. Ownership of the building will transfer to Berna upon the termination of the lease. The lease will not commence until the building is completed. Oliver completed the building at a total cost of P40,000,000 on January 1, 2020. The building is expected to be used over 50 years. In the immediately preceeding problem, assume that the building was completed on July 1, 2020, what is the income using the outright method. A. P4,000,000 B. P8,000,000 C. P32,000,000 D. P40,000,000
B
Statement 1: the excess of mortgage assumed by the buyer over the basis of the properties sold is the amount of the gain on the sale. Statement 2: any collection from an installment contract where the mortgage exceeds the tax basis of the properties received constitutes collection of income. Which statement is true? A. Statement 1 only B. Statement 2 only C. Both statements are true. D. Neither statement is true.
B
These are distinct and equal time periods over which income is measured A. Accounting methods B. Accounting periods C. Crop year basis D. Cash basis
B
Under which of the following will short accounting period not arise? A. Change of accounting period by a corporate taxpayer B. Change of accounting period by an individual taxpayer C. Death of a taxpayer D. Dissolution and liquidation of a business
B
Which is not a feature of final tax? A. Covers certain passive income B. Covers all capital gains C. Withholding at source D. None of these
B
Which statement is correct? A. Dealers of real properties can use the installment method without limitation. B. Dealers of personal properties can use the installment method without limitation. C. Non-dealers of properties can use the installment method if initial payment exceeds 25% of the selling price. D. Dealers of properties can use the installment method only id initial payment does not exceed 25% of the selling price
B
A corporation reporting on a fiscal year ending every March 31 shall file its 2017 income tax return no later than A. April 15, 2017 B. June 15, 2017 C. July 15, 2017 D. April 15, 2018
C
A taxpayer filed his income tax return in October 28, 2018. The deadline for the return was April 15, 2018. If he has P40,000 net tax due, what is the total surcharge penalty? A. P0 B. P8,000 C. P10,000 D. P20,000
C
A taxpayer received a notice from the BIR to file his 2016 income tax return not later than January 15, 2018. The tax due per his return is P100,000. What is his total interest penalty? A. P6,500 B. 7,900 C. P14,740 D. P15,068
C
Anderson died on March 31, 2017. Which is a correct statement? A. Anderson's 2017 income tax return shall cover January 1, 2016 to December 31, 2017 B. Anderson's 2017 income tax return shall cover January 1, 2017 to March 31, 2017 C. Anderson's 2017 income tax return shall cover January 1, 2017 to December 31, 2017 D. Anderson's 2017 income tax return shall cover April 1, 2017 to December 31, 2017
C
Which of the following properties when classified as capital asset is subject to capital gains tax? A. Domestic stocks sold directly to buyer B. Real property C. Both a or b D. None of these
C
A taxpayer received a notice from the BIR to file his 2016 income tax return not later than January 15, 2018. The tax due per his return is P100,000. What is the total surcharge penalty? A. P0 B. P20,000 C. P25,000 D. P50,000
D
Berlin corp. reported the following data for 2019: + total net sales made to customers were P2,000,000 in cash. + goods purchased for sale totaled P1,200,000 in cash. Beginning and ending inventory of goods for sale, respectively, were P200,000 and P300,000. + 1-year advanced rent of P30,000 to apply for 2020 was received from a sublease contract + P40,000 total interest income from customers promissory note earned. P30,000 of it was collected. + unrealized foreign exchange gains from foreign currency receivables totaled P60,000. Using accrual basis, compute the total income subject to income tax. A. P1,060,000 B. P1,000,000 C. P960,000 D. P970,000
D
Capital asset means A. Real properties used in business. B. Personal properties used in business. C. Real properties not used in business. D. Any property, real or personal, not used in business
D
Which is a correct statement regarding income taxes? A. An item of income subjected to final tax can still be subject to regular tax. B. An item of income exempted from final tax is nevertheless taxable to regular tax. C. An item of income subjected to capital gains tax may be subject to regular income tax. D. An item of income exempted from tax is likewise exempt from capital gains tax and regular income tax.
D
Which is not a special feature of regular income taxation? A. Use of accounting methods B. Use of accounting periods C. Annual payment of income tax D. Final withholding tax at source
D
Which is not an item of passive income? A. Royalties B. Prizes C. Deposit interest income D. Professional income
D
Which of the following accounting methods is most consistent with the lifeblood doctrine? A. Crop year method B. Cash basis C. Installment method D. Accrual method
D
Mani Pakyaw failed to pay his income tax return for the year 2019 which should have been files on or before April 15, 2020. The BIR sen him a notice to file his return and pay his tax on or before July 18, 2020. Mani Pakyaw filed a return showing a basic tax due of P1,000,000. Compute the total interest penalty. A. P35,836 B. P37,644 C. P38,555 D. P39,863
P30,904
T/F. Final tax generally covers passive income.
T
T/F. Generally, prepayments are non-deductible in the current accounting period.
T
T/F. Individuals file their income tax returns on or before april 15 of the following calendar year.
T
T/F. Initial payment includes downpayment and installments in the year of sale.
T
T/F. Large taxpayers are under the supervision of the BIR Large Taxpayer Service.
T
T/F. Prepayments are deductible but in the future period they expire or are consumed in the business or trade of the taxpayer.
T
T/F. Regular accounting periods are calendar and fiscal.
T
T/F. Regular income tax generally covers active income and capital gains.
T
T/F. The crop year method is an accounting method.
T
T/F. The depreciated value of the property upon termination of the lease constitutes income to the lessee.
T
T/F. The first accounting period of a starting business will more likely be less than 12 months.
T
T/F. The interest on unpaid taxes is computed on the basic tax only excluding the surcharge.
T
T/F. The technique used to measure income is referred to as an accounting method. The length of time over which income is reported is referred to as an accounting period.
T
T/F. The use of different methods for different businesses of the same taxpayer is permitted by law.
T
T/F. There are only two types of assets for purposes of taxation.
T
T/F. There are three types of gross income for taxation purposes.
T
T/F. e-BIR forms makes use o electronic data entry and filing.
T
T/F. e-FPS filers may file manually when there is a BIR system downtime.
T
T/F. e-FPS is fully electronic tax compliance.
T
Lancelot is a dealer of household appliances. He reported the following in 2019 and 2020: 2019. 2020 Installment sales P500,000; P800,000 Cost of installment sales 250,000; 440,000 Collections. 300,000; 600,000 Lance's 2020 collection is inclusive of P100,000 accounts from 2019. Using the accrual basis of accounting, compute Lancelot's gross income subject to income tax in 2020. A. P360,000 B. P320,000 C. P275,000 D. P250,000
A
Oliver entered into a 40-year lease contract with Berna. Per agreement, Oliver will construct a building on Berna's lot and operate the same for 40 years. Ownership of the building will transfer to Berna upon the termination of the lease. The lease will not commence until the building is completed. Oliver completed the building at a total cost of P40,000,000 on January 1, 2020. The building is expected to be used over 50 years. Compute Berna's income from the leasehold improvement to be reported in 2020 using the spread-out method. A. 200,000 B. P4,000,000 C. P8,000,0000 D. P32,000,000
A
Rich Goma corporation failed to file its income tax return for the fiscal year ending August 31, 2019. On June 6, 2020, it filed an income tax return with a basic tax still due and payable or the fiscal year amounting to P500,000. Compute the interest penalty to be imposed by the BIR. A. P28,603 B. P28,438 C. P45,873 D. P46,207
A
Rich Goma corporation failed to file its income tax return for the fiscal year ending August 31, 2019. On June 6, 2020, it filed an income tax return with a basic tax still due and payable or the fiscal year amounting to P500,000. Compute the total assessment to be paid, excluding compromise penalty. A. P653,603 B. P653,438 C. P689,275 D. P660,873
A
These are accounting techniques or conventions used to measure income A. Accounting methods B. Accounting periods C. Accrual basis D. Cash basis
A
Tomas leases an office space from Rafi, Inc. in a non-renewable 10-year lease contract. Just after he second year of the lease, Tomas renovated the premises and made improvements at a cost of P1,200,000. These improvements are expected to last for 12 years. Compute Rafi's annual income from the leasehold improvemetn using the spread-out method. A. P50,000 B. P37,500 C. P30,000 D. P20,000
A
Which is an incorrect statement regarding the use of accounting period? A. Individuals can either choose the calendar year or fiscal year accounting period. B. The regular accounting period for any taxpayer is 12 months. C. Individual taxpayers are not allowed to report income using fiscal accounting period. D. Corporations may opt to use either calendar or fiscal accounting period.
A
Which is not a scheme in taxing income? A. Ordinary gain taxation B. Regular income taxation C. Capital gains taxation D. Final income taxation
A
A taxpayer received a notice from the BIR to file his 2016 income tax return not later than January 15, 2018. The tax due per his return is P100,000. Compute the compromise penalty A. P10,000 B. P15,000 C. P20,000 D. P30,000
B
An individual income taxpayer shall file his or her income tac return on or before the A. 15th day of the fourth month of the same calendar year B. 15th day of the fourth month of the following calendar year C. 15th day of the fourth month of the same fiscal year D. 15th day of the fourth month of the following fiscal year
B
Astercor, Inc. reported the following during the year: + P400,000 proceeds of life insurance of an officer where Antercor is the beneficiary (P600,000 still uncollected) + P800,000 interest income, exclusive of P200,000 uncollected and accrued interest + P300,000 increase in value of investment in stocks Compute the gross income under accrual basis. A. P800,000 B. P1,000,000 C. P1,200,000 D. P1,400,000
B
Beneco corporation reports on a calendar year. On August 15, 2016, it stopped business due to persistent losses. Beneco corporation's last income tax return shall cover A. January 1 to December 31, 2016 B. January 1 to August 15, 2016 C. August 15, 2016 to August 15, 2016 D. August 15 to December 31, 2016
B
Berlin corp. reported the following data for 2019: + total net sales made to customers were P2,000,000 in cash. + goods purchased for sale totaled P1,200,000 in cash. Beginning and ending inventory of goods for sale, respectively, were P200,000 and P300,000. + 1-year advanced rent of P30,000 to apply for 2020 was received from a sublease contract + P40,000 total interest income from customers promissory note earned. P30,000 of it was collected. + unrealized foreign exchange gains from foreign currency receivables totaled P60,000. Using cash basis, compute the total income subject to income tax. A. P990,000 B. P960,000 C. P750,000 D. P690,000
B
Crevar constructs residential properties for clients and repots income by the percentage of completion method. In 2019, Crevar started a P2,000,000 construction contractd. Details of his 2019 and 2020 construction follow; 2019. 2020 Annual construction costsP200,000; P800,000 Estimated cost to finish. 800,000; 250,000 Extent of completion. 20%. 80% Compute the construction income in 2019 and 2020. A. P200,000; P560,000 B. P200,000; P400,000 C. P400,000; P400,000 D. P400,000; P560,000
B
During 2017, Klein corporation changed its accounting period to the calendar year. The adjustment return shall be filled on or before. A. April 15, 2017 B. July 15, 2017 C. April 15, 2018 D. July 15, 2018
C
Effective July 2, 2016, Rofelson company changed its fiscal year ending every March 31 to another fiscal year ending every August 31. An adjustment return shall be filed covering the period A. April 1 to July 2, 2016 B. April 1 to July1, 2016 C. April 1 to August 31, 2016 D. July 3 to August 31, 2016
C
Exquisite corporation sold its old warehouse with carrying amount (tax basis) of P600,000 for P1,000,000. A downpayment of 155 was collected on July 1, 2019. Additional P150,000 installment payments were received as of December 31, 2019. Compute the gross profit to be reported for the year 2019. A. P60,000 B. P120,000 C. P400,000 D. P450,000
C
In 2019, Bright Inc. sold its parking lot for P2,400,000 payable on installment. The lot was previously acquired for P1,500,000. The buyer has an outstanding unpaid balance of P1,800,000 as of December 31, 2019, Bright's year-end. Compute Exquisite's gross income in 2019 using the installment method. A. P900,000 B. P675,000 C. P225,000 D. P112,500
C
In 2020, Mr. Marangley, a dealer of car, disposed a brand new sports utility vehicle (SUV) which costs P800,000 for P1,200,000, inclusive o under the following terms: July 1, 2020 - as down payment. P100,000 Monthly installment thereafter. 50,000 Mr. Marangley will choose whichever favourable permissible income reporting method for him. How much gross income is to e reported in 2020? A. P400,000 B. P250,000 C. P116,667 D. P108,219
C
Income is reported by reference to the extent of project completion in A. Deferred payment method B. Installment method C. Percentage of completion method D. Completed contract method
C
Leasehold income is recognized over the lease term in A. Outright method B. Cash basis C. Spread-out method D. Percentage of completion method
C
Mani Pakyaw failed to pay his income tax return for the year 2019 which should have been files on or before April 15, 2020. The BIR sen him a notice to file his return and pay his tax on or before July 18, 2020. Mani Pakyaw filed a return showing a basic tax due of P1,000,000. Mr. Pakyaw must pay a surcharge of A. P0 B. P250,000 C. P500,000 D. P1,000,000
C
Santiago, Inc. has the following receipts during 2018: From service billings to clients P400,000 Advances from clients + 100,000= Total cash collection. P500,000 The P100,000 advances refer to services which will be rendered next year. Total uncollected billing increased from P100,000 on December 31, 2017 to P150,000 on December 31, 2018. Compute the gross income using cash basis. A. P400,000 B. P450,000 C. P500,000 D. P550,000
C
Which is correct regarding the crop year method? A. Crop year method is an accounting period B. Crop year method recognizes farming income when the next planting season. C. Crop year method matches cropping expenses with the income upon harvest. D. Crop year method recognizes cropping expenses when incurred and harvest income when realized.
C
Lancelot is a dealer of household appliances. He reported the following in 2019 and 2020: 2019. 2020 Installment sales P500,000; P800,000 Cost of installment sales 250,000; 440,000 Collections. 300,000; 600,000 Lance's 2020 collection is inclusive of P100,000 accounts from 2019. Using the installment method, compute Lancelot's gross income subject to income tax in 2020. A. P360,000 B. P320,000 C. P250,000 D. P275,000
D
Pedro, a farmer, uses the crop-year method in reporting his income from long-term crops. The following data are relevant to his farming operations in 2020: + sales of crops harvested, P900,000 + expenses on harvested crops, P400,000 + expenses on maturing crops, P200,000 + expenses on newly planted crops, P100,000 + sals of tree branches for firewood, P50,000 Pedro uses the crop-year method in reporting crop income. Compute Pedro's total income subject to tax. A. P240,000 B. P340,000 C. P540,000 D. P550,000
D
Santiago, Inc. has the following receipts during 2018: From service billings to clients P400,000 Advances from clients + 100,000= Total cash collection. P500,000 The P100,000 advances refer to services which will be rendered next year. Total uncollected billing increased from P100,000 on December 31, 2017 to P150,000 on December 31, 2018. Compute the gross income using accrual basis. A. P400,000 B. P450,000 C. P500,000 D. P550,000
D
T/F. Both manual filing and filing through e-BIR forms makes use of manual payment.
T
T/F. Accrual basis and cash basis are the most common accounting method used in practice.
T
T/F. Advanced income is an item of gross income for accrual basis taxpayers.
T
