SOUTHERN DE ORO PHILIPPINES COLLEGE
MIDTERM EXAMINATION – TAX 1
Name: ____________________________________________________
Score: ___________________________
Course and Year Level: ______________________________________
Date: ____________________________
General Instructions: The examination is composed of three parts: (A) True or false statements, (B) Problem solving and (C) Filling
up of Income Tax Return. Kindly follow the instruction of each part. Good luck!
A.
TRUE OR FALSE
Instruction: Read the following sentences and determine whether the statement is true or false. Indicate “TRUE” if the
statement is correct and “FALSE” if otherwise. Each item is worth two (2) points for a total of 20 points.
______________1. Fringe benefit tax is applicable only to managerial or supervisory employees. TRUE
______________2. Ron Weasley is a government employee. The monetized value of vacation and sick leave credits paid to him
is considered as fringe benefit. FALSE
______________3. Hermione Granger is appointed as the new manager of Secured Bank’s branch in Cagayan de Oro City. In
order to be effective at her position, her employer decided to send her to Hogwarts University in order to study Masters in
Business Administration for free. However, per agreement, she has to stay in the employ of the bank for 3 years. Such benefit
given to Hermione is considered as fringe benefit subject to fringe benefit tax. FALSE
______________4. A fringe benefit exempt from fringe benefit tax is also exempt from any other income tax. FALSE
______________5. It is always the taxpayer who remits his/her income tax to the Bureau of Internal Revenue (BIR). FALSE
______________6. Ron Weasley is a government employee with no other source of income aside from his employment. As a
taxpayer, he needs to file BIR Form 1701Q and pay his income tax payable quarterly. FALSE
______________7. Luna Lovegood is an Overseas Filipino Worker (OFW). Her income from her employment abroad is not subject
to Philippine income tax thus she is not required to file an income tax return. TRUE
______________8. Payment of income tax may be made through GCash Mobile Payment. TRUE
______________9. Husband and wife may file their income tax return separately. TRUE
_____________10. One copy of BIR Form 1701Q shall be filed with the BIR for self-employed individuals. FALSE
B.
PROBLEM SOLVING
Instruction: Provide the answers to the questions below. Show your solutions. This part is good for 30 points in total.
1.
During 2018, Secured Bank paid for the monthly rental of a residential house of its branch manager, Hermione Granger,
amounting to P65,000. Thus, total rentals paid by the bank for a quarter is P195,000.
a. How much is the quarterly fringe benefit tax on the benefit given to Hermione given she is a Filipino citizen?
Solution:
Quarterly rental payments by employer
Multiply by
Quarterly monetary value
Divided by
Grossed-up monetary value
Multiply by fringe benefit tax rate
Quarterly fringe benefit tax
b.
P 195,000
50%
97,500
65%
150,000
35%
P 52,500
How much is the quarterly fringe benefit tax if Hermione is a non-resident alien not engaged in trade or business (NRANETB)?
Solution:
Quarterly rental payments by employer
Multiply by
Quarterly monetary value
Divided by
Grossed-up monetary value
Multiply by fringe benefit tax rate
Quarterly fringe benefit tax
2.
P 195,000
50%
97,500
75%
130,000
25%
P 32,500
Secured Bank owns a condominium unit in Cagayan de Oro City. In 2019, the said bank furnished and granted the said
property for the residential use of its branch manager. The fair market value of the said property is P13 million while its
zonal value is P9,750,000.
1
a.
How much is the annual fringe benefit tax on such benefit?
Solution:
Market value or zonal value, whichever is higher
Multiply by
Annual value
Multiply by
Annual monetary value
Divided by
Grossed-up monetary value
Multiply by fringe benefit tax rate
Annual fringe benefit tax
b.
P 13,000,000
5%
650,000
50%
325,000
65%
500,000
35%
P 175,000
Assume that the condominium unit is not yet owned by Secured Bank. The bank purchases such property in 2019 at a
price of P9 million and transfers its ownership to the bank’s branch manager. How much is the fringe benefit tax to be
paid in 2019?
Solution:
Acquisition cost or zonal value, whichever is higher
Divided by
Grossed-up monetary value
Multiply by fringe benefit tax rate
Annual fringe benefit tax
3.
P 9,750,000
65%
15,000,000
35%
P 5,250,000
Harry Potter is a Filipino citizen who owns a flower shop. The following are the information regarding his business for each
quarter of the taxable year 2018:
Gross sales
Less: Cost of sales
Gross income
Less: Operating expenses
Net income
Income tax due
Income tax payable
a.
b.
c.
Q1
P 3,500,000
1,200,000
2,300,000
720,000
1,580,000
?
?
Q2
P 2,000,000
1,200,000
800,000
480,000
320,000
?
?
Q3
P 500,000
300,000
200,000
120,000
80,000
?
?
How much is his income tax payable for the 1st quarter?
How much is his income tax payable for the 2nd quarter?
How much is his income tax payable for the 3rd quarter?
Solution:
Gross sales (cumulative)
Less: Cost of sales (cumulative)
Gross income (cumulative)
Less: Operating expenses (cumulative)
Taxable income (cumulative)
Fixed tax
Tax on excess
Income tax due
Less: tax paid in previous quarters
Income tax payable
d.
Q1
P 3,500,000
1,200,000
2,300,000
720,000
1,580,000
Q2
P 5,500,000
2,400,000
3,100,000
1,200,000
1,900,000
Q3
P 6,000,000
2,700,000
3,300,000
1,320,000
1,980,000
130,000
234,000
364,000
0
P 364,000
130,000
330,000
460,000
364,000
P 96,000
130,000
354,000
484,000
460,000
P 24,000
How much is his income tax payable upon filing of BIR form 1701?
Solution:
2018 (Total)
P 6,500,000
3,000,000
3,500,000
1,440,000
P 2,060,000
Gross sales
Less: Cost of sales
Gross income
Less: Operating expenses
Taxable income
Tax on P 2,000,000
Tax on excess (P 60,000 x 32%)
Income tax due
Less: income tax previously paid (Q1 to Q3)
Income tax payable
--- Nothing follows ---
2
490,000
19,200
P 509,200
484,000
P 25,200
Q4
P 500,000
300,000
200,000
120,000
80,000
?
?