DON HONORIO VENTURA STATE UNIVERSITY

COLLEGE OF BUSINESS STUDIES

BACHELOR OF SCIENCE IN ACCOUNTANCY
QUALIFYING EXAMINATION
TAXATION
SET A
GENERAL INSTRUCTIONS:
 Write your name/code/set on the test questionnaires and answer sheet;
 During the duration of the exams, you are not allowed to talk. If you have any question or
concerns, ask your instructor or the assigned proctor. Remember, TALKING during the
examination is considered CHEATING;
 Select the correct answer for each of the following questions. Mark only one answer for each
item by SHADING the corresponding letter of your choice on the answer sheet provided.
 Use the blank paper for the solutions.
 When you are finished taking the exam, PASS your ANSWER SHEET together with the
TEST QUESTIONNAIRES AND BLANK PAPERS to your instructor or assigned
proctor.
 OBSERVE SILENCE upon going out the examination room. GOOD LUCK AND
GOD BLESS!!!
 Sec 24 (A) TAX TABLE is available on the LAST PAGE of the exam for your reference.

1. Which of the following is/are correct?

Statement A: Non-resident citizens are taxable on all income derived from sources within the
Philippines.
Statement B: Resident citizens and domestic corporations are taxable on all income derived from
sources within or without the Philippines.
Statement C: Foreign corporations, whether engaged or not in trade or business in the Philippines are
taxable from sources within or without the Philippines.
Statement D: Aliens, whether residents or not of the Philippines, are taxable only from sources within
the Philippines.
a. Statements C and D are correct
b. Statement A, B and D are correct
c. Statement B, C and D are correct
d. Statement A and D are correct

2. Which of the following are basic principles of a sound tax system?

a. Fiscal Adequacy, Economic Feasibility and Theoretical Justice
b. Fiscal Adequacy, Administrative Feasibility and Theoretical Justice
c. Progressive Taxation, Ability to Pay and Symbiotic Relationship
d. Fiscal Deficit, Administrative Feasibility and Ability to Pay

3. The concept of “situs of taxation” is based on which limitations of taxation?

a. Territorial jurisdiction
b. International comity
c. Exemption of the government
d. Public purpose
4. First statement: In civil tax cases involving collection of internal revenue taxes, prescription is
construed strictly against the government and liberally in favor of the taxpayer.
Second statement: In criminal tax cases involving tax offenses punishable under the Tax Code,
prescription is construed strictly against the government.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct

5. Ms. Glai Espenilla Bangug, a financial comptroller of EB Company, earns annual compensation of
P1,500,000, inclusive of 13th month and other benefits in the amount of P80,000 and mandatory SSS
contribution of P3,500 and Philhealth contribution of P2,000. Aside from her employment income, she
owns a convenience store, VAT-registered, with gross sales of P3,000,000. Sales discount amounts to
P300,000; sales returns and allowances amount to P150,000. Her cost of sales and operating expenses
are P1,000,000 and P600,000 respectively and with non-operating income of P100,000. Payments for
the first three (3) quarters amount to P300,000. How much is her total taxable income?
a. P2,913,500 c. P2,550,000
b. P2,463,500 d. None of the choices

6. ECB, non-VAT registered lessor of residential and commercial units had the following data for the first
and second quarters of 2018:

How much is the business tax of ECB for the first quarter?
a. P396,000 c. P246,000
b. P174,000 d. P 99,000

7. An alien employee of an offshore banking unit has the following income for the year 2018:

How much is the tax from his gross income in the Philippines?
a. P4,869,000 c. P2,250,000
b. P1,500,000 d. None of the choices

8. Under the TRAIN, the books of accounts shall be audited and examined yearly by independent
Certified Public Accountants and their income tax returns accompanied with a duly accomplished
Account Information Form (AIF) which shall contain, among others, information lifted from certified
balance sheets, profit and loss statements, schedules listing income-producing properties and the
corresponding income therefrom and other relevant statements if the:
a. gross annual sales, earnings, receipts or output exceed Three million pesos (P3,000,000).
b. gross quarterly sales, earnings, receipts or output exceed Three million pesos (P3,000,000).
c. gross annual sales, earnings, receipts or output amount to Three million pesos (P3,000,000) or more.
d. gross quarterly sales, earnings, receipts or output exceed One Hundred Fifty Thousand (P150,000).

9. Mr. Mark Tang is a partner of Tang Dayag Caiga Company, a business partnership. He owns 25%
interest. The gross sales of Tang Dayag Caiga Company amounted to P10,000,000.00 for taxable year
2021. The recorded cost of sales and operating expenses of the partnership were P2,750,000.00 and
P1,500,000.00, respectively. It had also incurred an interest expense of P200,000 in connection with
asset acquisition and earned interest income from bank deposit amounting to P100,000.
How much is the income tax liability of the partnership?
a. P1,725,000 c. P1,674,900
b. P1,392,500 d. None of the choices

10. Julian Cruz procured a life insurance upon his own life. He designated his estate’s executor as an
irrevocable beneficiary. For estate tax purposes, the proceeds of life insurance is:
a. included in the gross estate of Mr. Julian Cruz because when the executor of the estate is a
beneficiary the proceeds are included in the gross estate regardless of the designation.
b. not included in the gross estate of Mr. Julian Cruz because the designation of the beneficiary is
irrevocable.
c. included in the gross estate of Mr. Julian Cruz because proceeds of life insurance are always subject to
estate tax.
d. not included in the gross estate because, as a rule, proceeds of life insurance are generally not subject
to estate tax.

11. Your client, Antonio Manuel, is engaged in various transactions that are subject to percentage taxes.
His address is 143 S. Loyola Street, Sampaloc, Manila. The TIN is 143- 678-910-005. He is under RDO 032.
Email ad is [email protected]. The following data for the first quarter of the current year are
presented for your perusal.

How much is total tax due?

a. P68,500 c. P46,000
b. P30,000 d. None of the choices

12. Inlabada, VAT-registered company is engaged in the laundry business. During the first quarter of
2018, the following information were made available:
Receivable balances are all income related and are exclusive of VAT. Revenue and purchases are VAT
exclusive. Capital goods are estimated to have a useful life of 10 years. Compute the Output tax
a. P132,000 c. P120,000
b. P108,000 d. P106,560

13. The gross sales of GEAL Corporation for 2022 amounted to P6,000,000.00, with cost of sales
amounting to P4,000,000.00. It incurred. Operating expenses amounting to P1,000,000.00. Its total
assets excluding the land on which the particular business entity’s office, plant and equipment are
situated does not exceed P100,000,000.00. On the filing of its First Quarter Income Tax Return, its
signified its intention to avail of the OSD. Compute the income tax due
a. P360,000 c. P300,000
b. P240,000 d. None of the choices

14. Case 1: The City of Masbate passed an ordinance granting senior citizens free movie viewing on
certain days.
Case 2: The City of Masbate passed an ordinance limiting the discount given to senior citizens at 15%
instead of 20%.
a. Only Case 1 is valid.
b. Both cases are valid.
c. Only Case 2 is valid.
d. Both cases are not valid.

15. For income tax purposes, the term “corporation” shall include all the following except:
a. One person corporation
b. Partnerships no matter how created or organized
c. Joint-stock companies
d. General professional partnerships

16. Starting July 1, 2020, resident foreign corporations the taxable income and total assets of which do
not exceed P5,000,0000 and P100,000,000 respectively shall be taxed at:
a. 30% c. 25%
b. 20% d. 10%

17. The MCIT shall be imposed upon a domestic corporation or a resident foreign corporation:
I - whenever such corporation has a zero or negative taxable income;
II - when the amount of minimum corporate income tax is greater than the normal income tax due from
such corporation.
a. Both I and II are correct
b. Neither I nor II is correct
c. Only I is correct.
d. Only II is correct

18. In case of conflict between tax laws and generally accepted accounting principles (GAAP):
a. both tax laws and GAAP shall be enforced.
b. GAAP shall prevail over tax laws.
c. tax laws shall prevail over GAAP.
d. the issue shall be resolved by the court.
19. Aliw Service Corporation, registered with BIR in 2018, has the following data for the year 2021:
Gross receipts P1,000,000
Discounts given 100,000
Returns and allowances 150,000
Salaries of personnel directly involved in the supply of services 300,000
Fees of consultants directly involved in the supply of services 50,000
Rental of equipment directly used in the supply of services 70,000
Operating expenses 420,000
How much is the income tax due and payable?
a. P 27,000 c. Zero
b. P 6,600 d. None of the choices

20. A resident decedent left the following properties:

Real properties P10,000,000
Personal properties excluding bank deposit 15,000,000
Bank deposit
(P 940,000 net of final tax, was withdrawn from
the account of the decedent after the decedent died) 3,000,000
The gross estate of the decedent was:
a. P 28,000,000 c. P 26,000,000
b. P 27,000,000 d. P 25,000,000

21. An unmarried decedent died leaving properties he inherited 4 ½ years ago which had fair market
value of P800,000 at the time of his death (P650,000 at the time of inheritance). The present decedent
mortgaged the property for P50,000 and paid P20,000 before he died). Other properties in his gross
estate had fair market value of P1,000,000. The total expenses, losses, indebtedness, taxes and transfer
for public purpose amounted to P300,000
How much was the vanishing deduction?
a. P 225,000 c. P 102,900
b. P 108,333 d. P 100,000

22. In the year 2021, Mr. Nicko Macariola has the following transactions:
Gross receipts, trucking business P1,500,000
Gross receipts, lease of residential units
(monthly rental is P20,000 per unit) 2,500,000
Gross receipts, practice of accountancy 1,000,000
Sale of four (4) residential lots at P1,500,000 each to
four (4) individual buyers for socialized housing 6,000,000
Sale of three (3) parking spaces at P500,000 each 1,500,000
How much is total VAT-subject amount, assuming the taxpayer is not VAT-registered?
a. P8,500,000
b. P7,500,000
c. P6,500,000
d. None of the choices
23. These are taxes on goods manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition and to things imported as well as services performed in the
Philippine, which tax shall be in addition to the value-added tax.
a. Percentage Taxes
b. Income Tax
c. Documentary Stamp Taxes
d. Excise Taxes

24. A Company that hires a PWD shall be allowed subject to certain conditions:
a. Ten percent (10%) of the total amount paid as salaries and wages to senior citizens as additional
deduction.
b. Fifteen percent (15%) of the total amount paid as salaries and wages to senior citizens as additional
deduction.
c. Twenty-five percent (25%) of the total amount paid as salaries and wages to senior citizens as
additional deduction.
d. Thirty percent (30%) of the total amount paid as salaries and wages to senior citizens as additional
deduction.

25. During the year 2018, ABC Corporation paid for the monthly rental of a residential house of its
branch manager, Mr. J. de la Cruz, amounting to P 68,000.
How much is the fringe benefit tax?
a. P18,308 c. P 6,000
b. P16,000 d. None of the choices

26. The decedent was a resident unmarried head of family died on January 6, 2022.
The following data were provided from his estate:
Real and personal properties (excluding a piece of land valued at P2,000,000
transferred mortis causa to his son, and car valued at P500,000 which was revocably
transferred to a nephew, decedent waived his right to revoke before he died) P14,000,000
Family home 30,000,000
The following items were claimed as deductions from the gross estate:
Funeral expenses P 100,000
Judicial expenses 200,000
Unpaid real estate tax 2,000,000
Loss of a personal property due to theft (500,000 recovered from Insurance) 1,000,000
Transfer for public use 500,000
Medical expenses 300,000.
How much is to be reflected in line 40 of BIR Form 1801 (net taxable estate)?
a. P42,000,000. c. P28,000,000.
b. P32,000,000. d. P23,500,000

27. ATTY. PAPA, is a practicing lawyer, is also a licensed real estate broker. Both businesses were
registered with the BIR and had the following data made available for year 2018 (months are gross of
withholding tax):
Revenues from his profession 3,000,000
Commission received 600,000
Cost of services 700,000
Business related expenses 400,000
Gain on sale of real property held for investment 500,000
Selling price of real property 2,000,000
Wagering gain 150,000
Wagering losses 100,000
Royalties from books published 150,000
Interest Income from banks 30,000
Compute Tax due, assuming ATTY. opted to use itemized deduction in computing his income tax.
a. P810,000 c. P666,000
b. P698,000 d. P826,000

28. 1 st Statement: The term “goods” for value added tax purposes shall mean all tangible and intangible
objects which are capable of pecuniary estimation and shall include, but not limited to radio, television,
satellite transmission and cable television time.
2 nd Statement: The term “export sales” for VAT purposes shall include, but not be limited to sale of
gold to the Bangko Sentral ng Pilipinas.
a. True, False c. True, True
b. False, True d. False, False

29. ERA Corporation has the following sales during the month:
Sale to private entities 224,000.00
Sale to export-oriented enterprise 100,000.00
Sale of exempt goods 100,000.00
The following input taxes were passed on by its VAT suppliers during the month:
Input tax on taxable goods 5,000.00
Input tax on zero-rated sales 3,000.00
Input tax on sale of exempt goods 2,000.00
Input tax on depreciable capital good not attributable
to any specific activity 20,000.00

The VAT payable for the month:

a. 1,000 c. 7,200
b. 9,000 d. 16,000

30. The following are excluded from the gross estate of a decedent except:
a. Transfers before the decedent’s death, not in contemplation of death.
b. Bona fide sale for an adequate and full consideration in money or money’s worth before the
decedent’s death.
c. Exclusive properties or capital of the surviving spouse.
d. Proceeds of life insurance where the designation of the third party beneficiary is revocable.

31. Statement 1: A separate return shall be filed by each donor for each gift or donation made on
different dates during the year. Any previous gifts made in the same calendar year shall be reflected in
each return. The tax due shall be computed based on the total net gifts made during the calendar year.
Statement 2: Only one return shall be filed for several gifts or donations by a donor made on the same
date to different donees.
a. Both statements are true.
b. Statement 1 is true. Statement 2 is false.
c. Statement 1 is false. Statement 2 is true.
d. Both statements are false.

32. Statement 1: If the gift or donation involves conjugal/community property, each spouse shall file a
separate return corresponding to his/her respective share in the conjugal/community property.
Statement 2: If the gift or donation involves co-owned property, each co-owner shall file a separate
return corresponding to his/her respective share in the co-owned property.
a. All statements are true.
b. Statement 1 is true. Statement 2 is false.
c. Statement 1 is false. Statement 2 is true.
d. All statements are false

33. Ready Wear Go Corporation is a VAT-registered domestic corporation engaged in the manufacturing
and selling of t-shirts in Manila. It owns cars which are used by its executives for business travel. In 2021,
it sold two of its fully-depreciated cars: one to its manager, and the other to its CFO.
a. Only the sale of t-shirts are subject to output VAT.
b. Both the sale of t-shirts and sale of the 2 cars are subject to output VAT.
c. Both the sale of t-shirs and the sale of the 2 cars are VAT-exempt.
d. None of the above.

34. The following are the characteristics of VAT:

a. Indirect tax
b. Proportional tax
c. Consumption or end-user tax
d. All of the above.

35. Statement 1: A person who imports VATable goods, whether or not in the course of trade or
business, is subject to VAT.
Statement 2: If the importer is a non-VAT person, and the importation of VATable goods is not in the
course of trade or business, such person is not required to register for VAT.
a. Both statements are true.
b. Statement 1 is true. Statement 2 is false.
c. Statement 1 is false. Statement 2 is true.
d. Both statements are false.

36. J. Parada operates 9 passenger jeeps, a limousine service, a car detailing shop, and a store selling car
and jeep parts and accessories. His sales and receipts during the year are shown below:
Receipts, passenger jeeps ₱ 2,500,000
Receipts, limousine service 1,560,000
Receipts, car detailing shop 1,000,000
Sales, store 400,000
Total ₱ 5,460,000
a. Mr. Parada is required to VAT-register.
b. Mr. Parada is not required to VAT-register.
c. Mr. Parada may optionally register his VAT-exempt businesses under the VAT system.
d. None of the above.
37. Sweet Foot Massage Parlor is not VAT-registered and its annual gross receipts do not exceed
₱2,500,000. Lolo Chris, a senior PWD, went to Sweet Foot Massage to augment his physical therapy.
After the massage, he presented his PWD ID card to get the 20% discount. When he was shown the bill,
he was surprised to see that while the establishment gave him a 20% discount, it was charging him the
3% other percentage tax (“OPT”).
a. Lolo Chris should present his Senior Citizen ID Card to be exempted from the 3% OPT.
b. Lolo Chris may refuse to pay as he is also entitled to exemption from payment of the OPT.
c. Lolo Chris is liable to pay the OPT as the exemption granted by the law from payment of indirect
business taxes only covers VAT.
d. None of the above.

38. Statement 1: The importation of a cargo vessel destined for domestic or international transport
operations shall be exempt from VAT provided the importation complies with the requirements on
restriction on vessel importation and the mandatory vessel retirement program of the Maritime Industry
Authority (MARINA).
Statement 2: The sale or importation of fresh mushrooms is exempt from VAT.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are false.

39. Statement 1: The sale of services, including lease or property, to persons engaged in international
shipping or international air transport operations is 0-rated, provided the seller is VAT-registered and
such services are exclusively for international shipping or air transport operations. Statement 2: Services
provided by a motel-restaurant to flight attendants of an international airline shall be 0-rated.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are false.

40. Acting on the information given by A, the government seized and confiscated smuggled goods with a
fair market value of P40M. A received his reward amounting to
a. P4M c. P900,000
b. P3.6M d. P1M

41. Situs of taxation literally means place of taxation. Which of the following statements about situs is
wrong?
a. Poll tax may properly be levied upon persons who are inhabitants or residents of the state, whether
citizens or not.
b. Real estate is subject to taxation in the state in which it is located, whether the owner is a resident or
non-resident.
c. Tangible personal property is taxable where it has actual situs, or where it is physically located, even if
the owner resides in another jurisdiction.
d. Intangible personal property is taxable where the property is located
42. The ABC Bank is a domestic bank authorized by the BSP to operate as foreign currency deposit unit.
For the year 2020, it earned interest income of P100,000 from foreign currency transactions with non-
residents, OBUs, and other FCDUs. The rate of tax applicable to such interest income is
a. 20% c. 10%
b. 25% d. 7.5%

43. A cash dividend of P100,000 received by a taxpayer in 2020 from a foreign corporation whose
income from Philippine sources is 40% of its total income is
Statement 1- Partly taxable if he is a resident citizen
Statement 2- Partly taxable if he is a non-resident alien
a. Both statements are true
b. Both statements are false
c. Only Statement 1 is true
d. Only Statement 2 is true

44. Which of the following statements is correct?

a. The monetized value of unutilized vacation leave credits of ten (10) days or less which were paid to
the employee during the year are not subject to income tax and to withholding tax
b. The salary of an employee on vacation or on sick leave, which are paid notwithstanding his absence
from work is an exclusion from income.
c. Any amount which is required by law to be deducted by the employer from the compensation of an
employee excluding the withheld tax is considered as part of the employee’s compensation and is
deemed to be paid to the employee as compensation at the time the deduction is made
d. If living quarters or meals are furnished to an employee for the convenience of the employer, the
value thereof should be included as part of compensation income

45. This income is subject to final tax

a. Fringe benefits given to employees of a domestic corporation
b. Marriage fees, baptismal offerings received by a clergyman, evangelists or religious workers for
services rendered
c. Dividend income from a domestic corporation by a non- resident foreign corporation
d. Share of an individual taxpayer from the distributable net income of a general professional
partnership

46. D Co. took two life insurance policies on the of its Executive Vice-President, Mrs. E. In one policy, the
beneficiary is the corporation and the other, designates Mr. F, the EVP’s husband, as revocable
beneficiary. The insurance premiums paid by D Co. is
a. Deductible, only in so far as the first policy is concerned
b. Deductible for both policies
c. Not deductible for both policies
d. Deductible in so far as the second policy is concerned

47. As to scope of legislature power tax, which of the following is correct?

a. The power to tax is supreme, plenary, comprehensive and without any limit because the existence of
the government is a necessity
b. The discretion of Congress in imposing taxes extends to the mode, method and kind of tax, even if the
constitution provides otherwise
c. Congress has the right to levy a tax of any kind at any moment at it sees fit, even in the absence of any
constitutional provision
d. The sole arbiter of the purpose for which taxes shall be levied is Congress, provided the purpose is the
public and the courts may not review the levy of the tax to determine whether or not the purpose is
public

48. Recovery of bad debt written off by a taxpayer:

No.1: P20,000 from accounts written off in a year which had a net income of P200,000 before writeoff.
(write-off of the year was P20,000)
No.2: P5,000 from accounts written off in a year which had a net loss before write-off of P36,000 (write-
off for the year was P5,000);
No.3: P10,000 from accounts written off in a year which had a net income of P8,000 before writeoff.
(write-off for the year was P8,000).
The income from the bad debt recovery is:
a. P35,000 c. P28,000
b. P20,000 d. P30,000

49. It is an aspect of taxation that is administrative in character and the power to exercise it is vested on
the Department of Finance
a. Levying c. Imposition
b. Collection d. Legislation

50. A resident citizen received a prize of P40,000. Which of the following statements is correct in
connection with the imposition of final tax on prize?
a. The first P10,000 is part of taxable income while, the remaining P30,000 is subject to 20% final tax
b. The whole amount is part of taxable income
c. The whole amount of P40,000 shall be subject to 20% final tax
d. The first P10,000 shall be exempt from tax, the remaining P30,000 is subject to 20% final tax

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