1.

The term Corporation shall include:

I. Partnerships, no matter how created or organized
II. Joint stock companies
III. Joint accounts
IV. Associations
V. Insurance companies
VI. Mutual fund companies
VII. Regional operating headquarters of multinational corporations

a. I and II only
b. I, II and III only
c. I, II, III, IV and V only
d. All of the above

2. The term applies to a foreign corporation engaged in trade or business in the Philippines
a. Resident foreign corporation
b. Nonresident foreign corporation
c. Multinational corporation
d. Petroleum contractor

3. Royalty income received by a corporation beginning January 1, 2018 or upon effectivity of TRAIN Law
shall be subject to:
DC RFC NRFC
A 20% 20% 30%
B 7 ½% 7 ½% Exempt
C 15% 15% Exempt
D 15% 7 ½% Exempt

4. Royalty income from books received by a corporation beginning January 1, 2018 or upon effectivity of
TRAIN Law shall be subject to:
DC RFC NRFC
A 10% 10% 30%
B 20% 20% 30%
C 15% 15% Exempt
D 15% 7 ½% Exempt

5. ____________ are constituted when a group of individuals, acting jointly, establish and operate business
enterprise under an artificial name, with an invested capital divided into transferable shares, an elected
board of directors, and other corporate characteristics, but operating without formal government
authority.
a. Joint stock companies
b. Joint account companies
c. Associations
d. None of the above

6. Statement 1: Partnerships, no matter how created or organized, are taxable as corporations for income
tax purposes.
Statement 2: Associations and mutual fund companies, for income tax purposes, are excluded in the
definition of corporations.
a. Only Statement 1 is correct
b. Only Statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

7. A domestic corporation had the following data on income and expenses during the year 2020:
Gross income, Philippines 10,000,000
Business expenses, Philippines 2,000,000
Gross income, China 5,000,000
Business expenses, China 1,500,000
Interest income, Metrobank, Philippines 300,000
Interest income, Shanghai Banking Corporation, 100,000
China
 Rent income, net of 5% withholding tax 190,000

How much was the income tax payable?

a. 3,540,000
b. 3,530,000
c. 3,440,000
d. 2,480,000

8. Hananiah Corporation, a corporation engaged in business in the Philippines and abroad has the
following data for the current year:
Gross income, Philippines 975,000
Business expenses, Philippines 750,000
Gross income, Malaysia 770,000
Business expenses, Malaysia 630,000
Interest income, Philippines 25,000

How much is the income tax due if the corporation is:

DC RFC NRFC
A 116,800 72,000 320,000
B 109,500 67,500 300,000
C 312,000 515,850 116,800
D 109,500 72,000 300,000

9. Statement 1: GPP’s may claim the 40% OSD in the determination of distributable income.
Statement 2: A GPP is subject to income tax.
a. Only Statement 1 is correct
b. Only Statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

Use the following data for the next 3 questions

Garcia, Ramos, Toribio and Co, CPAs (GRT & Co) are partners of an accounting firm. The 2020 financial
records of the firm disclosed the following:
Service Revenue 4,490,000
Cost of services 1,610,000
Operating expenses 800,000
Rental income 500,000
Interest income from bank deposit 200,000
Interest income from foreign currency denominated sale 280,000
deposit

Ramos is also engaged in business with the following data for the year:
Gross sales 2,500,000
Cost of sales 1,250,000
Operating expenses 550,000

10. How much is the distributable income of the GPP?

a. 992,667
b. 1,019,333
c. 2,578,000
d. 2,978,.000

11. How much is the distributive share of each partner in the total income of the GPP?
a. 992,667
b. 1,019,333
c. 2,578,000
d. 2,580,000

12. How much is the taxable income of Ramos during the year?
a. 860,000
b. 1,510,000
 c. 1,560,000
d. 2,580,000

13. When different types of income are subjected to common tax rate, the tax system is described as
a. Global tax system
b. Gross income tax system
c. Scheduler tax system
d. Final tax system

14. As a rule, income from whatever source is taxable. Income from whatever source may come from:
I. Gains arising from expropriation of property
II. Gambling gains
III. Income from illegal business or from embezzlement
IV. Recovery of receivables previously written off
V. Tax refunds
VI. Compensation for injury suffered
VII. Gratuitous condonation of debt
a. I and II only
b. I, IV and V only
c. I, IV, V and VI only
d. I, II, III, IV and V only

15. Constructive receipt occurs when the money consideration or its equivalent is placed at the control of the
person who rendered the service without the restrictions by the payor. The following are examples of
constructive receipts, except:
a. A security deposit to insure the performance of certain obligations of the lessee to the lessor.
b. Deposit in banks which are made available to the seller of services without restrictions
c. Issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the
seller as payment for services rendered
d. Transfer of the amounts retained by the payor to the account of the contractor

16. Which of the following is not true about source of income?

a. In case of income derived from labor, source is the place where the labor is performed
b. In case of income derived from use of capital, source is the place where the capital is employed
c. In case of profits from sale of exchange of capital assets, source is the place where transaction
occurs
d. None of the above

17. A tax is employed by a shipping company touching Philippine and foreign ports. In 2018, he received a
gross payment for his services rendered of P3,000,000. In that year, the vessels on board of which he
rendered services had a total stay in Philippine ports of four months. His gross income from the
Philippines was
a. 0
b. 1,000,000
c. 1,500,000
d. 3,000,000

18. Which of the following cases may the taxable income be computed not on the basis of the calendar year?
I. Taxpayer has no accounting period
II. Taxpayer does not keep books of accounts
III. Taxpayer is an individual taxpayer
IV. Taxpayer is a corporation
V. Taxpayer is a GPP

a. IV only
b. IV and V only
c. III, IV and V only
d. None of the above
 19. A method of accounting which applies to a farmer who is engaged in producing crops which take more
than a year from the time of planting to the time of gathering and disposing. The entire cost of producing
crop must be taken as a deduction in the year in which the gross income from the crop is realized.
a. Cash basis
b. Accrual basis
c. Crop basis
d. Installment method

20. Which of the following instances may give rise to short accounting period?
I. When the corporation is newly organized using fiscal year
II. When a taxpayer dies
III. When a corporation changes accounting period
a. I only
b. II only
c. III only
d. I, II and III only

Use the following data for the next five questions

Juan dela Cruz, accounting manager of ABC Corporation, provided the following data for 2020 taxable year:
Salaries @ P120,000 per month 1,440,000
Allowances subject to liquidation 50,000
Allowances not subject to liquidation 60,000
Rice allowance at P3,000 a month 36,000
Christmas gift/bonus 30,000
th
13 month pay and mid-year bonus 240,000
Productivity incentive pay covered by a CBA 25,000
Monetized unused vacation leave for 12 days 66,000
Monetized unused sick leave for 5 days 27,500
Medical cash allowance to dependents 3,000
Actual medical benefits 10,000
Creditable withholding tax on compensation income 397,150

21. How much is the amount of exempt de minimis benefits?

a. 97,000
b. 107,000
c. 118,000
d. 124,500

22. How much is the amount of de minimis and other benefits subject to basic tax?
a. 240,500
b. 250,500
c. 251,500
d. 280,000

23. How much is the fringe benefits tax?

a. 48,000
b. 80,000
c. 32,308
d. 166,400

24. How much is the income tax payable of Juan for the year?
a. 130,000
b. 267,500
c. 397,150
d. 0

25. How much is the total allowable deduction from business income of ABC Corporation in relation to the
information provided?
a. 1,900,000
b. 1,500,000
c. 1,987,500
d. 2,019,708
26. Which of the following statements is correct?
I. A minimum corporate income tax of 2% of gross income as of the end of the taxable year is
imposed upon any domestic corporation beginning the 4th taxable year immediately following the
taxable year in which such corporation commenced its business operations.
II. MCIT shall be imposed whenever such corporation has zero or negative taxable income, or when
the amount of MCIT is greater than normal income tax due from such corporation
III. The computation and the payment of MCIT, shall likewise apply at the time of filing the
quarterly corporate income tax.
a. I only
b. II only
c. II and III only
d. I, II and III

27. Substantial losses from a “prolonged labor dispute” mean

a. Losses arising from a strike staged by the employees which lasted for more than 6 months within
a taxable period
b. The strike resulted to a temporary shutdown of business operations
c. Bothe of the above
d. None of the above

28. If the taxpayer is a seller of services, which of the following shall not form part of its cost of services?
a. Salaries and supplies
b. Employee benefits
c. Deprecation and rental expenses
d. Interest expense

29. The following information were taken from the records of ABC Inc., a domestic corporation already in
its 4th year of operations:
Gross profit from sales 3,100,000
Capital gain on sale directly to buyer of shares in a
domestic corporation 100,000
Dividend from:
Domestic corporation 20,000
Foreign Corporation 10,000
Interest on:
Bank deposit 20,000
Trade receivables 50,000
Business expense 2,100,000
Income tax withheld 115,000
Quarterly income tax payments 160,000
Income tax payable prior year (10,000)

The income tax payable at the end of the year:

a. 33,000
b. 43,000
c. 63,000
d. 318,000

30. ABC Inc., registered with BIR in 2015, has the following data in 2019:
Gross receipts 1,150,000
Discounts and allowances 250,000
Salaries of personnel directly involved in rendering service 300,000
Salaries of administrative personnel 100,000
Fees of consultants directly involved in rendering services 50,000
Rental of equipment used in rendering service 70,000
Rental of office space for use of administrative personnel 50,000
Other operating expenses 420,000

How much was the income tax due and payable?

a. 0
b. 6,600
 c. 9,600
d. 27,000

31. A domestic corporation, already on its 4th year of operation as of 2019, has the following data:
2019 2020
Sales 1,700,000 2,300,000
Cost of sales 1,050,000 1,425,000
Operating expenses 675,000 480,000
The income tax payable in 2019 was:
a. 13,000
b. 10,500
c. 35,000
d. 0

32. The income tax payable in 2020 was:

a. 111,000
b. 17,500
c. 98,000
d. 0

Use the following data for the next 5 questions

Le Bron Corporation has the following information for the current taxable year:
Quarter RCIT MCIT CWT
First 200,000 160,000 40,000
Second 240,000 500,000 60,000
Third 500,000 150,000 80,000
Fourth 300,000 200,000 70,000
Additional information:
 MCIT carry-over from prior year amounts to P60,000
 Excess tax credits from prior year amounts to P20,000

33. How much was the income tax payable for the first quarter?
a. 200,000
b. 160,000
c. 120,000
d. 80,000

34. How much was the income tax payable for the second quarter?
a. 660,000
b. 460,000
c. 200,000
d. 160,000

35. How much was the income tax payable for the third quarter?
a. 860,000
b. 120,000
c. 600,000
d. 140,000

36. How much was the annual income tax payable?

a. 1,260,000
b. 390,000
c. 230,000
d. 930,000

37. Using the same data preceding number except that the MCIT on the 4th quarter is P500,000, how much
was the annual income tax payable?
a. 330,000
b. 1,310,000
c. 380,000
d. 360,000
38. Pioneer College, a private educational institution has presented the following data for the year:
Gross income, related activities 5,000,000
Gross income, unrelated activities (except rental income) 5,000,000
Rental income (gross of 5% CWT) 2,000,000
Expenses, related activities 2,000,000
Expenses, unrelated activities 3,000,000
Dividend income from a domestic corporation 100,000
Quarterly income tax paid for the first 3 quarters 500,000
How much is the income tax payable?
a. 700,000
b. 1,850,000
c. 2,100,000
d. 1,500,000

39. Statement 1: If the amount to be distributed to a partner of a GPP is more than P720,000, it is subject
to 15% creditable withholding tax.
Statement 2: The share of a partner in a GPP is subject to final withholding tax of 10% if the amount is
below P720,000.
Statement 3: The distributive share of a partner in a commercial partnership is subject to final tax.
a. Statement 1, 2 and 3 are false.
b. Only Statement 3 is false
c. Only Statement 2 is false
d. Statements 1, 2, and 3 are true

40. Compensation income is earned when an employer-employee relationship exists. Which of the
following income represents income earned through employer-employee relationship?
I. Professional Fees
II. Wages
III. Pension pay
IV. Capital gain
a. I only
b. I and III only
c. II and III only
d. I, II, III, and IV only