ResA The Review School of Accountancy 7AS.ORO? & 734-3989 - September 16, 2017{Saturday) Final Pre-Board Examination 8:00 AM to 11:00 A.M. i ject the correct annwor gure Eee rh only one arswae for each item by shading the box corresponding £6 the letter of your choice on the sheer proviged. ICTEY NO ERASURES ARE ALLOWED. ned! no. the following + One of 2he following la not s ceiturion used by imposing Philippine incoae tax, 4. Cataenohip Principle b. Resident, Principle 6. Sources Principle 4. Reciprocity Principle ippine Congress 4) 2.0m individual cltlzen of the #hilippines who ie working and. derlying income EZom abroad a3 an ovoratas Contract worker (CCW) 1 considered 49 4 nonresident citizen and tenable on ~ a. a2] indom derived from scurcea within and without thw Philippines. (Sb. al ineowe derived trem ati sourcms Withis the Philippine €. all Ancop@ dyrived trom at] rourcey outside Lhe Philippines. a neither income within cor in¢om: =) theut the Philippines, 3. Which of the following atazements is incorrect? (A. The test to determing vhether a nonresident alien can be considered aa ¢ngaged. or not engaged in trade or caminiss within the Philippines is the Jength of his stay in the Piilippines daring any calendar year, regardless of the nature of Bis intention why he wants’ £0 stay in the Philippines. bh. Tf dn-alien ataye in the Philippines for 160 days or during the ecaléndar yoac. he shall be deenod 4 nonresiaent alien ‘engaged in or business in the Philippin ¢ ae engaged im teade oF business within the Philippines* 4 “Gncluges the -parformance Of personal services within the i Philippines. 5 “dA nario: piten individual he shall come to the Philippines and stay. thecein for an aggregate Gariod or pore than 180 Gaye during H any. calendar year sball be deemed a “non-resident alien doing 4 business in the Philippiae business in tha Philippines only if he is actually engaged in ‘ tr ‘ . ~ HoI-registered enterprsse has a “registered™ and an unregistered (oft itys Ene Minimin Cozpoeate income tax IMCIT! shall apply 57 i oth registered and unregiatered activities. AMEE include thew roxe of revenue on its £ se Ag avenue on ita flight from Manila a. Only 1 is correct sb. Only U1 is correct + ¢. Both T and 1t are eotreck, a. either Tor ff is correct, : 7. internatione) carriers that ao not have flight te and from the POITEppines But novethe ens earn income fren other activities in the souni Ry? a. ill pe subject to 24 4 apectal cate. b. wall be subject to Wt reguiar rate. o. Will Be subject cv both 4 8 spect b Fate and JOU regular rate. 9. #12 ADE be subject to PRiLippine ine ome Lax. - 4. The following are prime racte imatancea of accumitation of profits Beyond the ressonable noes of « business and indicative of purpose to Avoid income tax upon shareholders except: a. Investment of substantial earings and profits of the corpezation in unrelated business or in stock or securities of unrelated business ~b. Investment in bonds and ether long-term securities S. AccuMMLation of warnings’ in exces of 100% of paid-up capit. | Otherwise intended for the réssonable needa of detinad in the Regviations 4, None of the choices nok the business as 9. A non-stock, non-profit organization that enjoys exemption from income ” : was ke fide ant annual information return under carn on or before April wite WB Teaveechip sed ‘gana Senin’ Gee! dies any other g: ROE'ta Elle any rotucr shatsowrer, ¢@. file ahaual return only. enous it paid specifically, either az advances of reimbursesehts vee ar CrerMLLSey cteptaueitatens “aad ating beer sas ‘ordinary and necessary expenses incurred of reasonably expected ta be ‘incurred by the employee in the performance of Nis duties are not compensation subject te withholding if: 2 = Te fs ordinary and nece ry traveling and representation or entertainment expenses pala or incurred by the employee in the pursylt of the trade, business or profession aay Ti - Tha employee is required .to account oz Aiquidate. for the expenses «ih = accordance it specific requirements of aubstantiation for each category or expenses pursuant to provision of tho Sait Code, me fio correct i ° oy. LL. in correct se. Both E and If are correct d, Neither I nor 1] is correct: |,&. The depositor or investé: is an drdbwidua | . b. The. certificates should bo under the name ef individual and now undex the name of the corporation or tho bank or the eruae @epartnent or unit of the bank + Sale’ certificates mast ba (ssuea by fiflancial institutions . a Sa muat have maturity periud uf Aare than $ years. Ss a A vet banka only and not by other bat Sthe tine of declaration, S- At tha time the atocknelaers racelve © ‘GO aW the tine which cannot be deto LI Which of the following statements is incorrect) os Ae Ai Stock dividend which represents the transfer of su 3 bo capita Pemaet ba not aubject to Uncome tam Bocause (hey are not bealiied i 5 be AS dividend constitutes incosa if it gives the aharoholges an Anterest ditturent kom that which fis former pheckholdings % ‘Kepresented. ; : . “es hte Gividend.deds not constitute Income Lf tne new theres confer BG! Gifferent rights or intgress “than did the ofd- tng sey Sertiticates ples tha ‘oid representing the same proportionate Anterest in the asset of tha ceeperatlon a: did tne ola. wi A dividend paid in stock of arother corporatiut fa» alock dividend, even though the stock distribyted waa acquired through the tratstee by. the. corporation declaring th dividend of property to the i FORporation the etock of which is discrsbated' as dividend. ‘ M4, aba of the foltowiny prizes ard avards shall not be sobject te income 2 ‘Cotes Eds Of prizes roceived from ai eapieyer RaBINL receives ie an award for special servicns, such a2 award toe: sepia jeatione for thé prevention. of # bunk robbery : 3 \Ey won in a cometieure contest conducted for motecommercial or purpeses: f ge in a Literary contest where the recipient did not join the. hor requited to tender substantiel fiture secyices ag dae ‘to Receiving the prize or averd ot the exemption of tha retinesant benotita under px: erate saployors withoyt any Ketirament pian, the following : ni). among Others, Must be mot, except which one? a Aatiremont Denefite must be recpived under exloting bargaining’ 400K) Ox ather agreénente. ing employes hai served st osst five (8), years in the said. ae settasen employee a3 net lows than mapa Shan sixty-tlee 168) shich ‘dm cestared an the computacry. = ng free shall bo, ontitica to cetitenent pay equivalent to at’ mdoth “salary for every year of service, aty (60) years of age Dut» Page [4 “ 16,Mr. ria Rosales an employee of Glaiza Manufacturing Corporation offered to resign to take advantage of the company’s offer Qf veluntary redundancy program to reduce overhead expenses. His separation, pay is: -d4. subject to income tax because his separation from the employment was voluntary on his part in view of his offer to resign. x b. not subject to income tax because his separation is due to redundancy which is a cause beyond his control. ©. subject to both inéame tax and donor’s tax because the separation Pay constitutes a gift from his employer. qd. Mot subject to any tax because separation due redundancy connetes involuntariness on the part of the employee, 17, The following fringe b amployue Hound ny otal {ite were given by an employer to its for the quarter ending March 31, 2017; 9 benefits to supervisorn and mana: 200,000 100,000 Gora representing d expanses of rank and file employeas Be minimis benafita (not exceeding the maximum) . How much was the fringe benefit tax payable for the quarter? @. PI0L,176 ¢. P160,000 - b. P254,118 d, F 80,000 18. On January 15, 2017, Christine Company has a deposit account with Bance de Plata obtained a loan from Audrey Financing Corporation in connection with the operation of its business. Christine Company's taxable net income for the year 2017 befora the deduction of the interest expense amounted to P1,000,000. For the year 2017, the interest income it derived from the said daposit with Banco de Plata amounted to 180,000 on which a final tax of 236,000 had been withheld, Its interest expense on the” loan obtained from Audrey Financing Corporation during the aame year amounted to 160,060. - How mich is the tax due for taxable-year 2017? a. P272,820 c. P255, 000 bp. P256,000 d. None of the choices . 19. One of the differences of Wet Operating Loss Carry Over from Net Capital Loss carry over is; mys A a. MOLCO is allowed to individual taxpayers only. ~b. MOLCO’s carry over period is 3 years except an the case of mines 4 other than oil and gas wells which Ls 5 years, . MOLCO in deductible from gross income. \C Gl nouco started in the year 1998. ober 15, 2016, Cruz Corporation invested P300,000 tn samson 20" eae ‘ooanon shares. The following year, on July 15, 201g, Samson Corporation common shares became worthless. How much was the eapital lons ‘to be recognized by Cruz Corporation? a. P300,000 * ce. P75, 000 b. PL50,000 od. Hone of the choices 2). Which of the following statements is incorrect? “a. For income tax purposes, the accounting period of a taxpayer ik a period of 12 inontht b, Calendar year in @ period of 12 months acarting ending on Oacember 31. ve, Fiscal year is period of 17 months ending on the last day of any month other than December. dy A taxpayer may not have a taxable peried cf leas than 12 months. from January 1 and fom — FINAL PRE-BOARD EXAMINATION (BATCH22, The accrual of income and oxpunse L6 permitted When the ali = test has beon met. The abi cventa test requires: 1 - fixing of @ right to income. or liability to pay Ub - the avallability*ot the such income or Lhabil ity a. Only T in correct Se. Bork f and (1 are correct b. Only tf in correct a. Mesther t nor IT is correct 23, One of the following tax retuen. as An {hdividual whose gross income does not exceed his total personal and additional exempuions for dependents. b. A minimum wage earner (MWB) or an individual who is exempt from income tax pursuant to the provisions of the Tax Code c. A Marginal income earner the aroga saléa or gross receipts of whom do not exceed 7P100,000 during any 12-month period, ~ (td fy wae sd. An individual earning burely compensation income but who is concurfently employed by two or more employers at any time during the taxable year. pe preael CE LD thot medd ner re MLlal ind Ip teabela far P5,000,000 (EMV was +900,900). The prorecds ware und co bulld a peincipal residence In Manila, dhe informed the BIE within 40 days from the date of sale bhat ahe intended to june Ne prateeda to build @ hew principal rosfitonce. What wan Lhe lax cunsequence of the gale? cd. hot dot would ba exempy fron capital galna rax b. hotlot sioula poy « cop'cal gainn tax of P3060, oo ©. Latlot would be miler to capital @aing tax or under Section 24 (Al at her option de ft bor should wgpegit fa cecrow the amount ef ploo, oon individuals shall be cequired to file-an income 29. To 2017, Christian Masaplola, Relf-employed resident citizen, pald Th following national and local taxent i ine income tax for 2niT * OUP Chrintian Macaciola had uiqnified in his raturn te doduet toreian Income tax pald trom grows incomi, how much deduction for Andrea" - Hother of deceased wife, 65 years old, unemployed}!,. Beatrix -Legitimate child of deceased wife with her firse. hy band, : “ 20 years olds _ |. * -Gzarina - Legitimate child, 18 years olds : “Dianne - Legitimate new born child) : : Efren = Brother, 24 years old, physically disatiled, gaji employed ia wd oan telly Faith - niece, 2 years old with hearing disabilic i oy daughter of bis-deceased siaters peas frinate x» 32%) | ; (Het income befa peat expense eK50.4 Basic personal exenption I Additional exemption (any of the fellow P50, 000 | ing depehae nts: Czarina, Dianne, Faith, Grace and Isaiah) (4 x 25,000) 100, 0090 Total = [ Bi50, 000 51. B | ‘rsonal exemption ‘ i Additional exemption (Faith, and Isaiah) (3.x 25, 000) Total + Selling price Less: Value in the Ht hands of the donor \ Domestic purchases of goods (500,000 1s) 2 60,000 x 5/6) Importation of goods for use in all transactions (700,000 x 128 = 94,000 x 5/6) | : Payment for services for all transactions r (450,000 x 124 = $4,000 x 5/6) Total e4.¢ Output _tax on domestic sales (5,000,000 x 128) Less: Input taxes (see no. 50) Discount to senior citizens (1,000,000 x +208) Service expenses Salaries of senior cit. izens Special deduction for salaries of senior citizens (15% x 100,000) “Assistance given under Adopt-a-School 200,000 450,000 7 100, 000 a program 100,000»! Special deduction under Adopt-a-school (508 x 100, 00D) 50,000.) Other ‘operating expenses (500,000 - 100,000) 400, 000 Input tax on services allocated to VAT-exempt sales 54,009) Total deductible 66. B ‘Gross sales (5,000,000 + 1,000,000) Less: Cost of sales. Beginning inventory Add: Purchases (500,000 + 10,000* + 700,000 + 14, 000*) Total a : > Less: Ending inventor’ | 200,000] 1, 33%, 000) Gross income y Less: Deductible expenses (see no.752) . Taxable net income "tax on importation of npt (1/6 = 84,000)