DE LA SALLE UNIVERSITY (DLSU) Short Quiz 1

Taxation (INTAXTN) Second Term 2018-2019

Set A January 15, 2019

Name: ________________________________________________________________ Section: __________

Answers
1. 6. 11. 16.

2. 7. 12. 17.

3. 8. 13. 18.

4. 9. 14. 19.

5. 10. 15. 20.

Instruction: Choose the letter of the best answer from the given choices. University policies on academic
honesty as stated and inferred in the student handbook are strictly enforced.

1. Which of the following expenses may not be allowed as income tax deduction?
a. Rent expense supported by lease agreement but withou official receipt or invoice.
b. Advertising expense subjected to expanded withholding tax.
c. Salaries expense of security guards supported by notarized declaration that these were subjected to withholding
tax by security agencies.
d. Electricity expense not subjected to withholding tax since no withholding is required.

2. Mrs. Binisaya is a dedicated and honest employee of Ilongga Corporation for the past 20 years. She was advised
that she will be retrenched as the company was losing heavily but that should would be given separation pay
provided by law. Ilongga maintains a retirement plan but not BIR-registered. Which of the following statements is
correct?
a. If she filed a resignation letter to avoid inefficiency, the separation pay will be tax deductible if properly
subjected to withholding tax.
b. If she filed a resignation letter to avoid inefficiency, the separation pay will be tax deductible although there is no
withholding tax.
c. If she was retrenched by complying with the BIR rules on involuntary separation, the separation pay will be tax
deductible if properly subjected to withholding tax.
d. If she was retrenched by complying with the BIR rules on involuntary separation, the separation pay will not be
tax deductible since it was already claimed as income tax deduction when Ilongga made contribution to the
retirement plan.

3. The following will form part of entertainment, amusement and representation expense, except:
a. Dining expenses for entertaining a potential client.
b. Expenses in sporting event for entertaining guests.
c. Concert tickets for entertaining clients.
d. Expenses for business meetings of stockholders.

4. The following may qualify as ordinary and necessary expenses deductible from gross income, except:
a. Local vacation expenses of non-rank-and-file employees properly subjected to the applicable withholding tax on
fringe benefits.
b. Rentals of warehouse properly subjected to withholding tax.
c. Utilities expenses of production plant properly subjected to withholding tax.
d. Facilitation feed paid to government officials.

5. The following are deductible business expenses of an individual taxpayer for income tax purposes, except:
a. Personal expenses of a manager which were subjected to appropriate withholding tax on fringe benefits.
b. Salaries of security guards of the taxpayer’s store.
c. Ordinary repair expenses of store facilities.
d. Tuition fees of the taxpayer’s son.

6. Interest expense incurred to acquire property used in trade or business or exercise of a profession is:
a. Not allowed as a deduction against gross income regardless of whether the asset is classified as qualifying asset
or not under PAS 23.
b. Allowed as a deduction or treated as a capital expenditure at the option of the taxpayer regardless of
whether the asset is classified as qualifying asset or not under PAS 23.
c. Required to be treated as a capital expenditure to form part of the cost of the asset if it relates to a qualifying
asset based on the classification under PAS 23.
d. Allowed as a deduction or treated as a capital expenditure at the option of the taxpayer subject to the approval of
the BIR.

7. Bulkan Corporation was registered with the BIR on June 15, 20A1. It adopted the calendar year accounting period. If
it wanted to adopt the optional standard deduction, it should indicate said option when it filed its:
a. First quarter income tax return.
b. Second quarter income tax.
c. Fourth quarter income tax return.
d. Annual income tax return.

8. Which of the following expenses, related to tax assessment may not be tax deductible?
 a. Interest on deficiency income tax.
b. Compromise penalty related to deficiency documentary stamp tax.
c. Deficiency excise tax on sugar sweetened beverages.
d. Deficiency real property tax on specialized machinery.

9. No deduction shall be allowed where the transaction is between “related taxpayers” for the following, except:
a. Losses from sales or exchanges of property.
b. Depreciation.
c. Interest expense.
d. Bad-debts.

10. On October 12, 20A1, Adobo Corporation discovered that some finished goods inventories were stolen by its
employees. The related losses may be allowed as deduction provided that Adobo filed the declaration of loss with
the BIR on or before:
a. November 11, 20A1.
b. November 26, 20A1.
c. January 10, 20A2.
d. February 9, 20A2.

11. Mr. Hari, a sole proprietor rendering professional services incurred the following expenses for the year ended
December 31, 20A1: Salaries and wages of P5,000,000; separation pay of P1,000,000; representation expenses of
P50,000; taxi fare from office to his home and vice versa of P30,000; airfare for domestic travels which are business
related and with supporting documents issued in the name of Mr. Hari’s business of P100,000.

It was determined that 10% of the salaries and wages were not properly subjected to withholding tax. The separation
pay pertains to payment to employees who resigned during the year and these were not subjected to withholding tax.
The representation expenses (within the limit) are paid to its employees which were not properly liquidated and not
subjected to withholding taxes. The taxi fare is supported by official receipt issued in the name of Mr. Hari’s business.
How much are the deductible expenses for the year ended December 31, 20A1?
a. P4,500,000.
b. P4,600,000.
c. P5,100,000.
d. P6,600,000.

12. Konsultasyon Company, Inc. is engaged in the business of providing consultancy services. It derived revenues of
P5,000,000 for the year ended December 31, 20A1 and incurred the following expenses:

Entertainment, amusement and recreation P 60,000

Travel 450,000
Seminar fees 70,000

How much of these expenses are deductible for the year ended December 31, 20A1?
a. P500,000.
b. P520,000.
c. P570,000.
d. P580,000.

13. Julieta Corporation paid net amount of salaries and wages to its employees amounting to P9,000,000 for the year
ended December 31, 20A1, after effecting the following deductions for its employees:

SSS premiums contributions P420,000

Philhealth premiums contributions 100,000
Pag-ibig premiums contributions 180,000
Creditable withholding tax 300,000
Salary loans 80,000

In addition, the following pertains to the employer’s share in statutory contributions:

SSS premiums contributions P400,000

Philhealth premiums contributions 75,000
Pag-ibig premiums contributions 150,000

How much is the allowable deduction?

a. P10,080,000.
b. P10,405,000.
c. P10,625,000.
d. P10,705,000.

14. Mayamanin Corporation needs a warehouse. On January 1, 20A1, it entered into a lease contract with Matigasin
Corporation with the following terms:

Term 5 years
First year annual rental P600,000
Annual real property tax (RPT) shouldered by Mayamanin 15,000
Escalation (starting on the second year) 12%

The annual rentals were payable every January 1. Mayamanin capitalized the rentals in accordance with PFRS 16.
How much is the deductible rent for the year ended December 31, 20A2?
a. P15,000.
b. P672,000.
c. P687,000.
 d. P777,342.

Use the following problem for the next two questions:

Mr. and Mrs. Pichi-pichi, citizens of the Philippines, had the following information for the year ended December 31, 20A1:

Mr. Pichi-pichi Mrs. Pichi-pichi

Gross sales from business P5,000,000
Cost of sales from business 2,000,000
Gross receipts from practice of profession P2,800,000
Cost services from practice of profession 500,000
Expenses 1,200,000 300,000

15. How much is the combined lowest taxable income of Mr. and Mrs. Pichi-pichi for the year ended December 31, 20A1
assuming that they opted a deduction that will result in the least income tax liability?
a. P3,180,000.
b. P3,480,000.
c. P3,800,000.
d. P4,680,000.

16. Assume that Mrs. Pichi-pichi opted to adopt the itemized deduction when she filed her first quarter income tax return.
However, when she filed her second and third quarters income tax returns, she adopted the optional standard
deduction. How much is Mrs. Pichi-pichi’s taxable income for the year ended December 31, 20A1?
a. P2,000,000.
b. P1,680,000.
c. P1,380,000.
d. P1,120,000.

Use the following problem for the next two questions

On January 1, 20A1, Pagkakataon Corporation settled the following taxes, penalties and surcharges during the year
ended December 31, 20A1:

Local business tax P1,000,000

Real property tax 500,000
Deficiency documentary stamp tax 200,000
Deficiency income tax 1,500,000
Surcharge on deficiency income tax 375,000
Interest on deficiency income tax 270,000
Interest on deficiency documentary stamp tax 20,000

17. How much is the deductible interest expense for the year ended December 31, 20A1?
a. P375,000.
b. P290,000.
c. P270,000.
d. P20,000.

18. How much are the deductible taxes for the year ended December 31, 20A1?
a. P1,500,000.
b. P1,700,000.
c. P1,990,000.
d. P3,200,000.

Use the following problem for the next two questions:

On January 1, 20A0, Batirol Corporation constructed a multi-storey building at a cost of P50,000,000 with estimated
useful life of 50 years. On January 1, 20A5, it incurred additions and betterments of P11,250,000. However, on June 30,
20A8, the building was totally destroyed by fire. Since it was covered by insurance, the insurance company compensated
Batirol P35,000,000 for the fire loss. Batirol submitted the declaration of loss with the BIR on July 31, 20A8.

19. How much is the book value of the asset as of December 31, 20A6?
a. P56,250,000.
b. P53,750,000.
c. P45,000,000.
d. P43,000,000.

20. How much is the deductible loss for the year ended December 31, 20A8?
a. P51,875,000.
b. P21,250,000.
c. P16,875,000.
d. P6,500,000.