Accountancy Department

Pre-Test in Income Taxation

Name of student: ____________________________________ Score: _______________

Class Schedule: ____________________________________ Date: _______________
PART 1 - THEORY

1. The new ITR forms are

i. BIR Form No. 1700 – Annual ITR for individuals earing purely compensation income
ii. BIR Form No. 1701 – Annual ITR for Self-employed individuals, Estates and Trust
iii. BIR Form No. 1702 – RT – Annual ITR for Corporations, Partnership and Other Non-
Individual Taxpayers
iv. BIR Form No. 1702-EX – Annual ITR for use only by Corporations, Partnerships and Other
Non-Individual Taxpayers Exempt under the Tax Code
v. BIR Form No. 1702 – MX – Annual ITR for Corporations, Partnerships and Other Non-
Individuals with mixed income subject to multiple income tax rates or with income subject
to special preferential rates

a. Only two statements are correct

b. Only three statements are correct
c. Only four statements are correct
d. All statements are correct

2. The process by which the sovereign raises income to defray the expenses of the government is
called
a. Subsidy c. Taxation
b. Tariff d. Tribute

3. One of the characteristics of internal revenue tax is that they are

a. Criminal in nature c. Penal in nature
b. Political in nature d. Generally prospective in application

4. In case of conflict between tax laws and generally accepted accounting principles (GAAP)
a. Both tax laws and GAAP shall be enforced c. GAAP shall prevail over tax laws
b. Tax laws shall prevail over GAAP d. The issue shall be resolved by the court

5. Which of the following has no power of taxation

a. Provinces c. barangays
b. Cities d. barrios

6. Schedular system of income taxation means

a. All types of income are added together to arrive at gross income
b. Separate graduated rates are imposed on different types of income
c. Capital gains are excluded in determining gross income
d. Compensation income and business/professional income are added together in arriving at gross
income.

7. A tax reform at any given time underscores the fact that taxation is a/an
a. Inherent power of the state c. Essentially a legislative power
b. Power that is very broad d. State can and should adopt progressive taxation

8. The legislative body can impose a tax at any amount underscores the legal truism that taxation is
a. An inherent power of the tax c. very broad power of the state
b. Essentially a legislative power d. for public purpose

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9. Under this basic principle of sound tax system, the government should not incur a deficit
a. Theoretical justice c. fiscal adequacy
b. Administrative feasibility d. None of the above

10. A feasibility study needs or need to look into the taxes of different political subdivisions of
government which may be alternative sites of the business
a. Provinces, cities and municipalities must have uniform taxes between and among themselves
b. The local taxes of a political subdivision need not be uniform with the local taxes of another
political subdivision
c. Business that are subject to national taxes are exempted from local business taxes.
d. Local business taxes may be credited against national business taxes

11. Which of the following statements is not correct

a. Taxes may be imposed to raise revenue or to provide disincentives to certain activities within
the state
b. The state can have the power of taxation even if the constitution does not expressly give it the
power to tax
c. For the exercise of the power of taxation, the state can tax anything at anytime
d. The power of taxation in the Philippine Constitution are grants of power and not limitations on
taxing powers.

12. Which of the following statements is false

a. An inherent limitation of taxation may be disregarded by the application of a constitutional
limitation
b. The property of an educational institution operated by a religious order is exempt from property
tax, but its income is subject to income tax
c. The prohibition of delegation by the state of the power of taxation will still allow the Bureau of
Internal Revenue to modify the rules on time for filing of returns and payment of taxes
d. The power of taxation is shared by the legislative and executive departments of government

13. All appropriation, revenue or tariffs bills, bills authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the
a. Office of the president c. Senate
b. House of Representative d. Supreme Court

14. A tax must be imposed for public purpose. Which of the following is not for public purpose?
a. National defense c. public education
b. Improvement of sugar industry d. none of the above

15. A fundamental rule in taxation in which the property of one country may not be taxed by another
country. This rule in known as
a. International law c. reciprocity
b. International comity d. international inhabitation

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PART 2 – PROBLEM

1. The following information is available to determine the cost of sale of X:

Purchases P1,200,000
Purchase discounts 10,000
Purchase returns 40,000
Transportation in 5,000
Freight out 4,000
Inventory, end 50,000
Inventory, beginning 20,000

How much is the cost of sale?

2. A manufacturing business reported the following for its first year of operation:
Purchases of raw materials P540,000
Freight in 20,000
Raw materials, ending inventory 10,000
Direct labor 400,000
Factory Overhead 200,000
Work-in process, ending inventory 100,000
Finished goods, ending inventory 50,000
Sales 1,275,000
Freight out 12,000
Sales return 25,000

Its gross business income is?

3. Metrobank, Inc. reported the following during the taxable year:

Interest income from clients P10,000,000
Gain on sale of capital assets 5,000,000
Rent income 2,000,000
Salaries bank employees assigned on lending and
investment of funds 3,700,000
Salaries of Janitors and security guards 1,000,000
Depreciation of building 800,000
Depreciation of computers and teller machines used 600,000
Direct supplies used 200,000
Interest expense paid to depositors 1,500,000

How much is the gross income of Metrobank, Inc?

On March 1, 200A, Claudette leases a portion of its commercial building to Mark with the following
terms:
Advance deposit P40,000
Monthly rental 20,000
Annual insurance premium to be paid by the lessee 6,000
Portion (10 mos.) of real estate tax to be paid by lessee 3,000/yr

The lease contract also stipulates that a 5% of Mark’s net revenue will be credited to Claudette as
commission. Mark’s net revenue during the year is P2,000,000.

4. Claudette’s 200A rent income would be?

5. Assume that the advanced deposit is restricted, the Claudette’s gross reportable taxable income
would be?

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