21: Comprehensive Tax Cases
21
COMPREHENSIVE TAX CASES
“If I had stayed for other people to make my tools and things for me,
I had never made anything.” - Isaac Newton
Multiple Choice: Choose the best possible answer.
1. The following are the revenue items in the Income Statement of a
domestic corporation for the year 2011:
Sales
Cost of sales
Gain from sale of an office equipment
Gain from sale of land not used in business
(selling price P300,000)
Gain from sale of shares of stock directly to
the buyer
Gain from sale of shares of stock through the
stock exchange (selling price, P200,000)
Interest income from bank deposit, Philippines
Yield from deposit substitute, Philippines
Interest income received from depository bank
under EFCDS, Philippines
Interest income from bank deposit, USA
Interest on trade notes receivable, Philippines
Advance rent for two (2) years, Philippines
Royalties, Philippines
Royalties, USA
Dividend received from domestic corporation
Dividend received from a foreign corporation
Prizes and winnings, Philippines
Refund of Philippine value-added tax
Bad debt recovery
P1,000,000
500,000
20,000
100,000
50,000
10,000
40,000
80,000
60,000
400,000
30,000
600,000
70,000
300,000
150,000
350,000
400,000
100,000
50,000
Question 1: How much is total exempted/excluded income?
a. P323,000
c. P260,000
b. P302,500
d. P250,000
Question 2: How much is the total final withholding taxes on
passive income?
a. P63,000
c. P42,500
b. P50,000
d. P20,500
Question 3: How much is the total capital gains tax?
a. P63,000
c. P42,500
b. P50,000
d. P20,500
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21: Comprehensive Tax Cases
Question 4: How much is the total gross income subject to regular
corporate income tax?
a. P2,650,000
c. P2,320,000
b. P2,350,000
d. P2,250,000
Answers: Question 1 – C
Question 2 – C
Question 3 – D
Question 4 – A
Question 1 – Total exempted/excluded income
Gain from sale of shares of stock through the
stock exchange
Dividend received from domestic corporation
Refund of Philippine value-added tax
Total
P 10,000
150,000
100,000
P 260,000
Question 2 – Total final withholding taxes on passive income
Interest income from bank deposit, Philippines
(P40,000 X 20%)
P 8,000
Yield from deposit substitute, Philippines
(P80,000 X 20%)
16,000
Interest income received from depository bank
under EFCDS, Philippines (P60,000 X 7 ½%)
4,500
Royalties, Philippines (P70,000 X 20%)
14,000
Total
P 42,500
Question 3 – Total capital gains tax
Presumed gain from sale of land not used in business
(P300,000 X 6%)
Gain from sale of shares of stock directly to the buyer
(P50,000 X 5%)
Total
P 18,000
2,500
P 20,500
Question 4 – Total gross income subject to corporate income tax
Sales
P 1,000,000
Less: Cost of sales
(
500,000
)
Gross income
P 500,000
Other income
Gain from sale of an office equipment
20,000
Interest income from bank deposit, USA
400,000
Interest on trade notes receivable, Philippines
30,000
Advance rent for two (2) years, Philippines
600,000
Royalties, USA
300,000
Dividend received from a foreign corporation
350,000
Prizes and winnings, Philippines
400,000
Bad debt recovery
50,000
Total gross income
P 2,650,000
365
21: Comprehensive Tax Cases
2. A resident citizen, 50 years old, married, with three (3) qualified
dependent children asks you to assist him in computing his taxable
net income for the year 2011:
Gross professional income, net of 15% withholding tax P 800,000
Professional expenses
300,000
Retirement benefits received from his previous
employer that maintained a reasonable private
pension plan (he served the company for 12 years)
250,000
Lump sum benefits received from SSS
200,000
Prize in a sports tournament sponsored by a group
of businessmen promoting health products
50,000
Gain from sale of bonds (maturity period is 4 years)
10,000
Interest income from bonds with a maturity period
of 7 years
20,000
Interest on long term deposits with maturity period
of 5 years
30,000
Philippine Lotto winnings
500,000
Share in the net income of a business partnership
100,000
Question 1: How much is the total amount of excluded or
exempted income?
a. P1,150,000
c. P980,000
b. P1,000,000
d. P480,000
Question 2: How much is the final withholding tax on certain
income?
a. P34,000
c. P24,000
b. P30,000
d. P20,000
Question 3: How much is the taxable net income?
a. P526,176
c. P385,000
b. P516,176
d. P375,000
Answers: Question 1 – B
Question 2 – D
Question 3 – A
Question 1 – Total amount of excluded or exempted income
Retirement benefits received from his previous
employer that maintained a reasonable private
pension plan (he served the company for 12 years) P 250,000
Lump sum benefits received from SSS
200,000
Interest income from bonds with a maturity period
of 7 years
20,000
Interest on long term deposits with maturity period
of 5 years
30,000
Philippine Lotto winnings
500,000
Total
P 1,000,000
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21: Comprehensive Tax Cases
Question 2 – Final withholding taxes on certain income
Prize in a sports tournament sponsored by a group of
businessmen promoting health products
(P50,000 X 20%)
P 10,000
Share in the net income of a business partnership
(P100,000 X 10%)
10,000
Final withholding taxes
P 20,000
Question 3 – Taxable net income
Gross professional income, net of 15%
withholding tax (P800,000/85%)
Other income:
Gain from sale of bonds (maturity period is 4 years)
10,000
Total gross income
Less: Professional expenses
300,000
Basic personal exemption
50,000
Additional exemption
75,000
Taxable net income
P 941,176
951,176
425,000
P 526,176
3. A resident citizen, widower, with a dependent minor brother, has
the following data on income and expenses: Gross business
income, P500,000; Business expenses, P200,000; Interest from
savings deposit, BPI-Makati, Philippines, P50,000; Prize in a literary
contest he joined, P100,000; Prize received for achievement in
literature (did not join the contest), P10,000; Gain from sale of
bonds (maturity is
6 years), P5,000; Separation pay from his former job (resigned),
P250,000; Cash he inherited from his uncle, P300,000; Proceeds of
his wife’s life insurance (revocable beneficiary), P1,000,000;
Amount received as return of premium (premium paid, P150,000),
P200,000; Tax Informer’s Reward, P500,000; Interest income from
Government bonds, P20,000; Winnings from illegal gambling,
P10,000.
Question 1: How much was the total amount of excluded or
exempted income?
a. P1,465,000
c. P1,450,000
b. P1,460,000
d. P 465,000
Question 2: How much was the total final tax from certain income?
a. P134,000
c. P80,000
b. P 84,000
d. P30,000
Question 3: How much was the taxable net income subject to
Section 24 (A)?
a. P560,000
c. P500,000
b. P550,000
d. None of the choices
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21: Comprehensive Tax Cases
Answers: Question 1 – A
Question 2 – B
Question 3 – A
Question 1 – Total amount of excluded or exempted income
Prize received for achievement in literature
(did not join the contest)
P
10,000
Gain from sale of bonds (maturity is 6 years)
5,000
Cash he inherited from his uncle
300,000
Proceeds of his wife’s life insurance
(revocable beneficiary)
1,000,000
Amount received as return of premium
150,000
Total amount of excluded/exempted income
P 1,465,000
Question 2 – Total final tax from certain income
Interest from savings deposit, BPI-Makati, Philippines
(P50,000 X 20%)
P 10,000
Prize in a literary contest he joined (P100,000 X 20%)
20,000
Tax Informer’s Reward (P500,000 X 10%)
50,000
Interest income from Government bonds (P20,000 X 20%)
4,000
Total final tax
P 84,000
Question 3 – Taxable net income
Gross compensation income (separation pay)
P
250,000
Less: Basic personal exemption
(
50,000 )
Taxable compensation income
P 200,000
Gross business income
P 500,000
Other income
Excess of amount received as return
of premium
50,000
Winnings from illegal gambling
10,000
Total gross income
P 560,000
Less: Business expenses
(
200,000
)
360,000
Taxable net income
P 560,000
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21: Comprehensive Tax Cases
4. Mr. John Juan, single, resident citizen and supporting a qualified
dependent illegitimate son, has the following data for year 2011:
Gross sales of goods
P1,000,000
Sales returns and allowances
50,000
Cost of sales
300,000
Interest income, Philippine currency bank deposit
10,000
Share in the net income of business partnership,
net of 10% withholding tax
90,000
Salaries of employees, net of P30,000 creditable
withholding tax
270,000
Value-added tax
100,000
Business permit and licenses
5,000
Community tax
10,000
Interest paid on business loan which has already
prescribed
20,000
Contributions to pension trust
(P20,000 covers past year’s cost)
50,000
Entertainment expenses
10,000
Interest expense
50,000
Research and development costs (deferred)
benefits realized starting July 1, 2011
60,000
Purchase of equipment (estimated life is 5 years,
acquired on October 1, 2011)
50,000
Fringe benefits expenses
68,000
Fringe benefits tax expense
32,000
Question 1: How much is the total itemized deductions?
a. P584,950
c. P506,950
b. P566,950
d. P504,450
Question 2: Assuming Mr. Juan fails to indicate in the return his
choice of deductions, how much is the taxable net
income?
a. P255,000
c. P150,000
b. P175,000
d. P 68,050
Question 3: Assuming Mr. Juan chooses optional standard
deduction, how much is the taxable net income?
a. P495,000
c. P255,000
b. P368,050
d. P175,000
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21: Comprehensive Tax Cases
Answers: Question 1 – C
Question 2 – D
Question 3 – A
Question 1
Salaries expense (P270,000 + P30,000)
Business permits and licenses
Community tax
Contributions to pension trust
Current service cost
Past service cost (P20,000/10 years)
Entertainment expenses
Actual
Limit (.005 X P950,000)
Deductible interest expense
Interest expense
Reduction (33% X P10,000)
Research and development cost
(P60,000/60 months X 6 months)
Depreciation expense, equipment
(P50,000/5 X 3/12)
Fringe benefits expenses
Fringe benefits tax expense
Total itemized deductions
P 300,000
5,000
10,000
P 30,000
2,000
32,000
P 10,000
P 4,750
4,750
P 50,000
3,300
46,700
Question 2 (Itemized deductions)
Gross sales
Less: Sales returns and allowances
Net sales
Less: Cost of sales
Gross income
Less: Itemized deductions (see no. 1)
Net income before exemptions
Less: Basic personal exemption
Additional exemption
Taxable net income
Question 3 (Optional Standard Deduction)
Gross sales
Less: Sales returns and allowances
Net sales
Less: Optional standard deduction (40% X P950,000)
Net income before exemptions
Less: Basic personal exemption
Additional exemption
Taxable net income
6,000
2,500
68,000
32,000
P 506,950
P1,000,000
50,000)
P 950,000
300,000
650,000
( 506,950)
P 143,050
(
50,000)
(
25,000)
P 68,050
(
P1,000,000
50,000)
P 950,000
( 380,000)
P 570,000
(
50,000)
(
25,000)
P 495,000
(
370
21: Comprehensive Tax Cases
5. (Phil. CPA Modified) From the following data, compute the income
tax still due from a domestic corporation engaged in merchandising
business. For the calendar year 2011, the net income per books is
P150,000, after considering among others:
Non-taxable income (others)
P 5,500
Inter-corporate dividends
5,500
Net capital loss
2,500
Bad debts written of
6,500
Non-deductible expenses (others)
12,000
Contribution to a non-profit religious organization
12,000
Contribution to Government’s priority program
1,500
Quarterly income tax payments
65,000
Provision for bad debts
8,000
The net income per books should be reconciled with the provisions
of the Tax Code, meaning, items which are not taxable must be
excluded and items which are not deductible are to be added back.
How much is the net tax due and payable?
a. P66,240
c. P1,240
b. P62,100
d. None of the choices
Answer: C
Net income per books
Add (Deduct):
Non-taxable income (others)
Inter-corporate dividends
Net capital loss
Bad debts written of
Non-deductible expenses (others)
Quarterly income tax
Provision for bad debts
Net income after charitable and other contributions
Add: Charitable and other contributions
(P12,000 + P1,500)
Net income before charitable and other contributions
Less: Charitable and other contributions
Deductible in full
(P 1,500)
Deductible with limit
Actual
(P12,000)
Limit (5% X P234,000)
(P11,700) ( 11,700 )
Taxable net income
Tax due (30%)
Less: Payments, first 3 quarters
Tax payable
371
P 150,000
(
(
5,500)
5,000)
2,500
(
6,500)
12,000
65,000
8,000
P 220,500
13,500
P 234,000
(
(
13,200)
P 220,800
P 66,240
65,000)
P
1,240
21: Comprehensive Tax Cases
6. (Phil. CPA) The following were taken from the income statement of
ABC Corporation for the taxable year 2011:
Gross profits from sales
P 800,000
Less: Business expenses
(P 440,000)
Provision for bad debts
(
80,000
) (
520,000 )
Net income before tax
P 280,000
Additional information:
1.) Accounts written of during the year and charged to
allowance for bad debts, P50,000;
2.) Recoveries on accounts receivable previously written of in
2010 and credited to allowance for bad debts:
Allowed as deduction by BIR
P30,000
Disallowed as deduction by BIR P20,000
How much was the taxable net income?
a. P390,000
c. P340,000
b. P360,000
d. P280,000
Answer: C
Net income per books
Add (Deduct):
Provision for bad debts
Bad debt recovery
Accounts written of
Taxable net income
P 280,000
(
80,000
30,000
50,000)
P 340,000
7. A married individual taxpayer with two qualified dependent children
has the following cumulative data for the year 2011:
First
Second
Third
Quarter
Quarter
Quarter
Year
Business income
P 150,000 P 300,000 P 700,000 P1,000,000
(gross of 1%
withholding tax)
Business expenses
50,000
150,000
300,000
400,000
Question 1: How much is the tax payable for the first quarter?
a. P14,500
c. P9,000
b. P13,000
d. None of the choices
Question 2: How much is the tax payable for the second quarter?
a. P25,000
c. P9,000
b. P10,500
d. None of the choices
Question 3: How much is the tax payable for the third quarter?
a. P95,000
c. P66,000
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21: Comprehensive Tax Cases
b. P79,000
d. P50,000
Question 4: How much is tax payable for the whole year?
a. P37,000
c. P27,000
b. P30,000
d. None of the choices
Answers: Question 1 – B
Question 2 – C
Question 3 – C
Question 4 – C
INDIVIDUAL TAXPAYER (PURE BUSINESS INCOME EARNER)
Questions 1 to 3 - Quarterly Declarations (Returns)
First Q
Second Q
Third Q
Gross income
P 150,000
P 150,000
P 400,000
Add: Other income
Total gross income
150,000
150,000
400,000
Less: Deductions
(
50,000) (
100,000
)(
150,000 )
Taxable income, this quarter
100,000
50,000
250,000
Add: Taxable income,
previous quarters
100,000
150,000
Taxable income to date
P 100,000
P 150,000
P 400,000
Tax due Section 24 (A)
P 14,500
Less: Tax credits/payments
Prior year’s excess tax credit (
)
Tax payments, previous Qs (
)
22,000
)
Creditable tax withheld,
previous quarters
(
)
Creditable tax withheld,
this quarter
(
1,500)
4,000
)
Tax payable (overpayment)
P 13,000
P 25,000
)
(
(
(
-
)
(
13,000
1,500)
(
P
P 95,000
(
1,500
9,000
)(
3,000)
)(
P 66,000
Question 4 - Annual Income Tax Return
Gross taxable business/professional income
P1,000,000
Add: Other taxable income
Total
1,000,000
Less: Deductions
( 400,000)
Net income
600,000
Less: Basic personal exemption
(P 50,000)
Additional exemption
( 50,000 ) ( 100,000)
Taxable income
P 500,000
Tax due Section 24 (A)
Less: Tax credits/payments
Prior year’s excess credits
Tax payments, first 3 quarters
373
P 125,000
(
88,000)
Page
1 of 4
21: Comprehensive Tax Cases
Creditable tax withheld, first 3 quarters
Creditable tax withheld, this quarter
Tax payable (overpayment)
(
(
P
7,000)
3,000)
27,000
374
21: Comprehensive Tax Cases
8. A single taxpayer has the following data for the year 2011 (in
thousands):
First
Quarter
Gross compensation income
P 40
Gross receipts
600
Cost of services
100
Business expenses
(total itemized)
100
Share, business partnership
10
Share, general professional
partnership, gross of 10% wtax 20
Yield on deposit substitute
5
Second
Quarter
Third
Quarter
Fourth
Quarter
P 40
400
100
P 40
280
80
P 40
600
200
150
-
100
10
200
-
20
5
20
5
20
5
Question 1: How much is the tax payable for each quarter and the
entire year assuming the taxpayer uses itemized
deductions?
a.
b.
c.
d.
First
Quarter
Second
Quarter
Third
Quarter
Annual
P101,000
P 59,000
P 99,000
P 57,000
P153,800
P107,000
P 50,800
P 46,000
P192,200
P140,360
P 36,400
P 31,360
P297,800
P242,760
P 87,100
P 77,900
Question 2: How much is the tax payable for each quarter and the
entire year assuming the taxpayer uses optional
standard deduction?
a.
b.
c.
d.
First
Quarter
Second
Quarter
Third
Quarter
Annual
P101,000
P 59,000
P 87,000
P 99,000
P153,800
P107,000
P 78,800
P 50,800
P192,200
P140,360
P 58,160
P 36,400
P307,400
P242,760
P138,300
P 87,100
Answers: Question 1 – C
Question 2 – C
Question 1 – Itemized Deductions
Quarterly Declarations (Returns)
First Q
Gross receipts
P600,000
Less: Cost of services
( 100,000 )
80,000 )
Gross income
500,000
Add: Share in net income
of GPP
20,000
Total gross income
520,000
Less: Deductions
( 100,000)
100,000 )
375
Second Q
Third Q
P400,000
P 280,000
(
100,000
)(
300,000
(
20,000
320,000
200,000
20,000
220,000
150,000
)(
21: Comprehensive Tax Cases
Taxable income, this quarter
Add: Taxable income,
previous quarters
Taxable income to date
420,000
170,000
P 420,000
420,000
P 590,000
590,000
P 710,000
Second Q
P153,800
Third Q
P 192,200
First Q
Tax due Section 24 (A)
P 101,000
Less: Tax credits/payments
Prior year’s excess tax credit (
)
Tax payments, previous Qs (
)
149,800 )
Creditable tax withheld,
previous quarters
(
)
Creditable tax withheld,
this quarter
(
2,000)
2,000
)
Tax payable (overpayment)
P 99,000
Annual Return
Gross taxable compensation income
Less: Deductions
Premium paid on health and/or
hospitalization insurance
Basic personal exemption
Additional exemption
TCI (excess of deductions over GTCI)
Gross receipts
Less: Cost of services
Gross taxable business/
professional income
Add: Other taxable income
Total
Less: Deductions
Net income
Less: Excess of deductions over GTCI
Taxable business income
Total taxable income
)
(
(
(
120,000
-
)
99,000
2,000)
(
(
2,000
P 50,800
(
)(
4,000)
)(
P 36,400
P 160,000
P
(
50,000
-
50,000
P 110,000
P 1,880,000
480,000 )
P 1,400,000
80,000
P 1,480,000
(
550,000 )
P 930,000
-
Tax due Section 24 (A)
Less: Tax credits/payments
Prior year’s excess credits
Tax payments, first 3 quarters
Creditable tax withheld, first 3 Qs
Creditable tax withheld, fourth quarter
Tax withheld on salary (on TCI of P110,000)
Foreign tax credits
Tax payable (overpayment)
930,000
P 1,040,000
P 297,800
(
(
(
(
(
(
)
186,200)
6,000)
2,000)
16,500)
)
P 87,100
376
21: Comprehensive Tax Cases
Question 2 - Optional Standard Deduction (OSD)
Quarterly Declarations (Returns)
First Q
Second Q
Gross receipts (GR)
P600,000
P400,000
Less: OSD
(40% X Total GR)
240,000
160,000
Gross income
360,000
240,000
Add: Share in net income
of GPP
20,000
20,000
Taxable income this quarter
380,000
260,000
Add: Taxable income,
previous quarters
380,000
Taxable income to date
P 380,000
P 640,000
Tax due Section 24 (A)
P 89,000
Less: Tax credits/payments
Prior year’s excess tax credit (
)
Tax payments, previous Qs (
)
165,800 )
Creditable tax withheld,
previous quarters
(
)
Creditable tax withheld,
this quarter
(
2,000)
2,000
)
Tax payable
P 87,000
Annual Return
Gross taxable compensation income
Less: Deductions
Premium paid on health and/or
hospitalization insurance
Basic personal exemption
Additional exemption
TCI (excess of deductions over GTCI)
Gross receipts
Less: OSD (40% X P1,880,000)
Net
Add: Other taxable income
Net income
Less: Excess of deductions over GTCI
Taxable business income
Total taxable income
112,000
168,000
20,000
188,000
640,000
P 828,000
P169,800
)
(
(
(
P 229,960
-
)
(
87,000
2,000)
(
(
P 78,800
)(
4,000)
2,000
)(
P 58,160
P 160,000
P
(
50,000
-
50,000
110,000
P 1,880,000
752,000 )
1,128,000
80,000
P 1,208,000
-
Tax due Section 24 (A)
Less: Tax credits/payments
Prior year’s excess credits
Tax payments, first 3 quarters
Creditable tax withheld, first 3 Qs
Creditable tax withheld, fourth quarter
Tax withheld on salary (on TCI of P110,000)
Foreign tax credits
Tax payable
377
Third Q
P 280,000
1,208,000
P 1,318,000
P 386,760
(
(
(
(
(
(
)
223,960)
6,000)
2,000)
16,500)
)
P 138,300
21: Comprehensive Tax Cases
9. The 2010 income tax return of Alice Corporation shows the
following data:
Income tax due
P 250,000
Less: Tax credits
Quarterly payments for the first three quarters ( 300,000)
Excess tax payments
(P 50,000)
Alice Corporation opts to claim the excess payments in 2010 as tax
credit to be carried over to succeeding quarters of 2011.
The following cumulative data are presented:
First
Second
Third
Quarter
Quarter
Quarter
Year
Sales, gross of 1%
withholding tax P 500,000 P1,100,000 P1,500,000 P2,200,000
Cost
Operating expenses
250,000
50,000
650,000
150,000
800,000
300,000
1,200,000
500,000
Question 1: How much is tax payable for the first quarter?
a. P60,000
c. P23,000
b. P24,000
d. P 5,000
Question 2: How much is tax payable for the second quarter?
a. P90,000
c. P23,000
b. P24,000
d. P 5,000
Question 3: How much is tax payable for the third quarter?
a. P120,000
c. P26,000
b. P 90,000
d. P23,000
Question 4: How much is tax payable for the whole year?
a. P26,000
c. P23,000
b. P24,000
d. P 5,000
378
21: Comprehensive Tax Cases
Answers: Question 1 – D
Question 2 – B
Question 3 – C
Question 4 – C
CORPORATE TAXPAYER
Questions 1 to 3 - Quarterly Declarations (Returns)
First Q
Second Q
Third Q
Sales
P500,000
P600,000
P 400,000
Less: Cost of sales
( 250,000 ) (
400,000
)(
150,000 )
Gross income
250,000
200,000
250,000
Add: Other income
Total gross income
250,000
200,000
250,000
Less: Deductions
(
50,000) (
100,000
)(
150,000 )
Taxable income, this quarter
200,000
100,000
100,000
Add: Taxable income,
previous quarters
200,000
300,000
Total taxable income to date
P 200,000
P 300,000
P 400,000
Tax rate
30%
30%
30%
Tax due
P 60,000
P 90,000
P 120,000
Less: Tax credits/payments
Prior year’s excess tax credit (
50,000
)(
50,000)
(
50,000 )
Tax payments, previous Qs (
) (
5,000
)(
29,000
)
Creditable tax withheld,
previous quarters
(
) (
5,000) ( 11,000)
Creditable tax withheld,
this quarter
(
5,000) (
6,000
)(
4,000
)
Tax payable (overpayment)
P
5,000
P 24,000
P 26,000
Question 4 - Annual Return
Sales
Less: Cost of sales
Gross income from operation
Add: Non-operating and other income
Total gross income
Less: Deductions
Taxable income
Tax rate
Income tax due
Less: Tax credits/payments
Prior year’s excess credits
Tax payments, first 3 quarters
Creditable tax withheld, first 3 quarters
Creditable tax withheld, fourth quarter
Tax payable (overpayment)
379
P 2,200,000
( 1,200,000)
P 1,000,000
P 1,000,000
(
500,000)
P 500,000
30%
P 150,000
(
(
(
(
P
50,000)
55,000)
15,000)
7,000)
23,000
21: Comprehensive Tax Cases
10. The following condensed data were taken from Quarterly income
statements of The Clazz Corporation, which was registered with the
BIR in 2005. The data were for the year 2011.
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Sales
P1,200,000 P1,000,000 P2,200,000 P1,500,000
Beginning inventory
500,000
Purchases
300,000
200,000
400,000
500,000
Ending inventory
200,000
300,000
300,000
600,000
Rent income, gross
of 5% withholding
tax
150,000
150,000
200,000
Selling expenses
250,000
350,000
150,000
300,000
Question 1: How much is the tax payable for each quarter and the
entire year assuming the taxpayer uses itemized
deductions?
a.
b.
c.
d.
First
Quarter
Second
Quarter
Third
Quarter
Annual
P150,000
P135,000
P142,500
P127,500
P360,000
P324,000
P202,500
P181,500
P915,000
P684,000
P545,000
P350,000
P300,000
P918,000
P300,000
P234,000
Question 2: How much is the tax payable for each quarter and the
entire year assuming the taxpayer uses optional
standard deduction?
a.
b.
c.
d.
First
Quarter
Second
Quarter
Third
Quarter
Annual
P150,000
P135,000
P142,500
P127,500
P360,000
P324,000
P202,500
P181,500
P915,000
P684,000
P545,000
P350,000
P300,000
P918,000
P300,000
P234,000
380
21: Comprehensive Tax Cases
Answers: Question 1 – C
Question 2 – D
Question 1 – Corporate Taxpayer (Itemized Deductions)
Quarterly Declarations (Returns)
First Q
Second Q
Third Q
Sales
P1,200,000
P1,000,000
P 2,200,000
Less: Cost of sales
(
600,000
)( 100,000 )(
400,000 )
Gross income
P 600,000 P 900,000
P 1,800,000
Add: Other income
150,000
150,000
200,000
Total gross income
P 750,000
P1,050,000
P 2,000,000
Less: Deductions
(
250,000
) ( 350,000 ) (
150,000 )
Taxable income,
this quarter
P 500,000
P 700,000
P 1,850,000
Add: Taxable income,
previous quarters
500,000
1,200,000
Total taxable income
to date
P 500,000 P 1,200,000
P 3,050,000
Tax rate
30%
30%
30%
Tax due
P 150,000 P 360,000
P 915,000
Less: Tax credits/payments
Prior year’s excess
tax credit
(
- )(
- )
(
)
Tax payments, previous
quarters
(
- )(
142,500
)(
345,000
)
Creditable tax withheld,
previous quarters
(
- )(
7,500) (
15,000)
Creditable tax withheld,
this quarter
(
7,500
) ( 7,500
)(
10,000
)
Tax payable (overpayment)
P 142,500 P
202,500 P
545,000
Beginning inventory
Add: Purchases
Goods available for sale
Less: Ending inventory
Cost of sales
First Q
Second Q
P 500,000
P 200,000
300,000
200,000
800,000
400,000
(
200,000
)(
300,000 )
P 600,000 P 100,000
Annual Return
Sales
Less: Cost of sales
Gross income from operation
Add: Non-operating and other income
Total gross income
Less: Deductions
Taxable income
381
Third Q
300,000
400,000
700,000
300,000 )(
P
P
400,000
P 5,900,000
( 1,300,000)
P 4,600,000
500,000
P 5,100,000
( 1,050,000)
P 4,050,000
21: Comprehensive Tax Cases
Tax rate (except MCIT rate)
Income tax
Less: Tax credits/payments
Prior year’s excess credits
Tax payments, first 3 quarters
Creditable tax withheld, first 3 quarters
Creditable tax withheld, fourth quarter
Tax payable (overpayment)
Computation of the Cost of Sale for the Whole Year
Beginning inventory
Add: Purchases
Goods available for sale
Less: Ending inventory
Cost of sales
30%
P 1,215,000
(
(
(
(
P
)
890,000)
25,000)
)
300,000
P
500,000
1,400,000
P 1,900,000
(
600,000)
P 1,300,000
Question 2 – Corporate Taxpayer (Optional Standard Deductions)
Quarterly Declarations (Returns)
First Q
Second Q
Third Q
Sales
P1,200,000
P1,000,000
P 2,200,000
Less: Cost of sales
(
600,000
)( 100,000 )(
400,000 )
Gross income
P 600,000 P 900,000
P 1,800,000
Add: Other income
150,000
150,000
200,000
Total gross income
P 750,000
P1,050,000
P 2,000,000
Less: OSD (Total gross
income X 40%)
(
300,000
) ( 420,000 ) (
800,000 )
Taxable income,
this quarter
P 450,000
P 630,000
P 1,200,000
Add: Taxable income,
previous quarters
450,000
1,080,000
Total taxable income
to date
P 450,000 P 1,080,000
P 2,280,000
Tax rate
30%
30%
30%
Tax due
P 135,000 P 324,000
P 684,000
Less: Tax credits/payments
Prior year’s excess
tax credit
(
- )(
- )
(
)
Tax payments, previous
quarters
(
- )(
127,500
)(
309,000
)
Creditable tax withheld,
previous quarters
(
- )(
7,500) (
15,000)
Creditable tax withheld,
this quarter
(
7,500
) ( 7,500
)(
10,000
)
Tax payable (overpayment)
P 127,500 P
181,500 P
350,000
Beginning inventory
Add: Purchases
First Q
P 500,000
300,000
Second Q
P 200,000
200,000
P
Third Q
300,000
400,000
382
21: Comprehensive Tax Cases
Goods available for sale
Less: Ending inventory
Cost of sales
383
800,000
400,000
(
200,000
)(
300,000 )
P 600,000 P 100,000
700,000
300,000 )(
P
400,000
21: Comprehensive Tax Cases
Annual Return
Sales
Less: Cost of sales
Gross income from operation
Add: Non-operating and other income
Total gross income
Less: OSD (40% X P5,100,000)
Taxable income
Tax rate (except MCIT rate)
Income tax
Less: Tax credits/payments
Prior year’s excess credits
Tax payments, first 3 quarters
Creditable tax withheld, first 3 quarters
Creditable tax withheld, fourth quarter
Tax payable (overpayment)
Computation of the Cost of Sale for the Whole Year
Beginning inventory
Add: Purchases
Goods available for sale
Less: Ending inventory
Cost of sales
P 5,900,000
( 1,300,000)
P 4,600,000
500,000
P 5,100,000
( 2,040,000)
P 3,060,000
30%
P 918,000
(
(
(
(
P
)
659,000)
25,000)
)
234,000
P
500,000
1,400,000
P 1,900,000
(
600,000)
P 1,300,000
384