Page 1 of 7 | TAX 03
ALLOWABLE DEDUCTIONS
BANGGAWAN, SORIANO, ESGUERRA
ALLOWABLE DEDUCTIONS
BANGGAWAN, SORIANO, ESGUERRA
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Taxes paid:
License tax
Documentary stamp tax
Capital Gains Tax
Special Assessment
Municipal tax
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Problem 1
The f ollowing information relates to GRINDELWALD Corporation, a domestic corporation with assets (excluding land)
amounting to P150,000,000:
2022
2023
Gross Sales
P3,300,000
P4,340,000
Cost of Sales
2,400,000
1,070,000
Dividend-f oreign Corporation
140,000
--Dividends-Domestic Corporation
50,000
10,000
Interest income on notes receivable
28,000
16,400
Interest income from bank deposits-LC
100,000
60,000
Capital gain
--13,000
Capital loss
20,000
--Interest Expense
150,,000
180,000
Tax expense (see breakdown below)
63,000
106,079
Bad debts-written of f
34,680
--Bad debts-recovery f rom 2021
--22,000
Pension expense (see breakdown)
45,000
68,000
Discount given to Senior Citizen-25%
155,000
150,000
Other Special deductions under NIRC
17,500
23,500
Salary of PWD Workers
75,000
95,000
Productivity incentives
120,000
130,500
Other Deductions
775,000
1,025,000
Pension expense
Current Service Cost
Past Service Cost
8,000
7,650
12,344
15,000
20,006
9640
8,567
11,780
33,570
42,522
30,000
15,000
50,000
18,000
d. 354,086 gain
2. How much is the Net operating loss carry over f or 2022?
a. 275,336
b. 151,336
c. 132,586
d. 72,586
3. Determine the Income tax payable f or 2022?
a. 10,680
b. 16,020
c. 18,000
d. 21,360
4. Determine the Interest expense deductible f or 202?
a. 150,000
b. 117,000
c.130,000
d. 20,000
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1. How much is the Net operating income/loss f or 2022?
a. 220,250 loss b. 220,250 gain
c. 354,086 loss
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Page 2 of 7 | TAX 03
BANGGAWAN, SORIANO, ESGUERRA
ALLOWABLE DEDUCTIONS
d.31,500
6. Determine the Special deductions f or 2022?
a. 220,250
b. 78,750
c. 233,750
d. 17,500
7. Determine the Deductible Tax Expense f or 2023?
a. 106,079
b. 60,729
c. 18,207
d. 51,777
8. How much is the Regular deductions f or 2023?
a. 1,534,029
b. 1,544,529
c. 1,487,179
d. 1,532,529
9. Determine the amount of Special deductions f or 2023?
a. 112,500
b. 23,500
c. 232,500
d. 47,250
c.304,238.75
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10. How much is the Tax liability f or 2023?
a. 241,127
b.320,258.75
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5. How much is the Pension expense deductible f or 2022?
a. 45,000
b. 18,000
c. 4,500
d. 309,578.75
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11. If the company opts to use OSD f or year 2023, how much is the income tax liability?
a. 385,284
b. 479,820
c. 487,530
d. 482,190
Problem 2
HOGWARTS company, a domestic corporation earned the f ollowing income f or the year 2023:
Gross Income
15,000,000.00
4,500,000.00
6,800,000.00
Allowable Deductions
3,000,000.00
1,980,000.00
3,450,000.00
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Country
Philippines
Singapore
Japan
Tax Paid
600,500.00
1,200,000.00
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12. Determine the amount of tax liability of Hogwarts company f or year 2023
a. 2,667,000
b. 2,711,904.04
c. 3,029,500
d. 3,162,500
Problem 3
Quiditch Company, a domestic corporation engaged in the sale of goods has the following data for the taxable year 2023:
4,280,000
12,000
1,640,300
40,000
Salaries expense
Representation expense
Interest expense
Rental payments – 12 months plus 2-month security deposit
Loss incurred due to typhoon, reported to BIR af ter 75 days
Donations to Caritas, an accredited NGO
Donation to a public school under the adopt a school program
Other expenses
425,000
25,000
30,000
14,000
14,000
20,000
100,000
354,200
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Gross Sales
Sales discount
Cost of sales
Interest income f rom bank deposit
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Page 3 of 7 | TAX 03
BANGGAWAN, SORIANO, ESGUERRA
ALLOWABLE DEDUCTIONS
13. Determine the amount of net taxable income f or year 2023?
a. 1,623,160
b. 1,623,460
c. 1,619,800
d. 1,669,800
14. How much is the tax liability of the company f or year 2023?
a. 405,790
b. 324,692
c. 323,960
d. 333,960
Problem 4
Atty. Kim earned the f ollowing f or year 2023:
Gross Revenue related to his practice of prof ession
Direct cost of services
Expenses
Equivalent amount of probono services rendered by Atty Kim
Other income
Dividends f rom domestic corporation
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2,300,000
980,000
400,200
150,000
160,000
180,000
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15. Determine the net taxable income subject to regular income tax of Atty. Mat ic
a. 929,800
b. 1,109,800
c. 947,800
d. 1,127,800
2020
10,000,000.00
4,500,000.00
120,000.00
45,000.00
2021
7,000,000.00
6,500,000.00
132,000.00
50,000.00
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Net Sales
Cost of sales
Rent Expense
Recreation Expense
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Problem 5
The f ollowing relates to HUG company, a domestic corporation incorporate in the year 2010:
2022
15,000,000.00
7,650,400.00
144,000.00
80,000.00
320,000.00
360,000.00
38,000.00
450,000.00
Taxes paid to LGU
Depreciation expense
12,500.00
124,000.00
14,900.00
124,000.00
16,300.00
124,000.00
45,000.00
78,000.00
140,000.00
74,000.00
114,000.00
14,000.00
22,000.00
11,000.00
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Bad debts written of f
Recovery of bad debts f rom -2021
Salaries Expense
75,000.00
60,000.00
89,000.00
Capital gain
Capital loss
30,000.00
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Productivity Incentives
Training expense f or Managers
Other expenses
40,000.00
16. Determine the net taxable income f or year 2020
a. 4,647,000
b. 4,684,500
c. 4,697,000
d. 4,659,500
17. How much is the tax liability of HUG company f or year 2021?
a. Zero
b. 10,000
c. 70,000
d. 5,000
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Page 4 of 7 | TAX 03
BANGGAWAN, SORIANO, ESGUERRA
ALLOWABLE DEDUCTIONS
18. Determine the tax still due f or 2022?
a. 1,167,480
b. 1,465,600
c. 1,460,600
d. 1,451,100
Problem 6
Sandra, a resident citizen, owns a convenience store. Below is the financial information of her convenience store f or the
taxable year ended December 31, 2023.
2,300,000.00
280,000.00
168,712.00
Cost of Sales
Operating Expenses
1,348,060.00
348,500.00
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Other Income
Royalties f rom Books
Prizes f rom singing competition
Interest f rom bank deposit-f oreign currency
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Sales to regular customer
Sales to Senior Citizens (net of discount)
Sales to PWDs (Net of discount)
80,000.00
5,000.00
20,000.00
19. How much is the total regular and special allowable deductions (excluding cost of sales)?
a. 460,678
b. 418,500
c. 390,678
d. 348,500
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20. Determine the net taxable income if the business opts to use OSD
a. 910,698
b. 1,721,534
c. 1,716,534
Problem 7
Patricia acquired a leasehold is f or business purposes f or P10,000,000. The lease contract is f or 10 years.
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21. How much is the deductible amount f rom the gross income?
a. P500,000
c. P5,000,000
b. 1,000,000
d. P0
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Problem 8
An individual taxpayer has the f o llowing data f or the year 2023:
50,000
200,000
330,000
65,000
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Interest income, BDO West Avenue branch (net)
Interest paid, business loan
Interest paid, loan to f inance personal car
Interest expense on delinquency business related taxes
22. For income tax purposes, the deductible interest expense shall be
a. P252,500
c. P255,000
b. P138,600
d. P150,000
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Page 5 of 7 | TAX 03
BANGGAWAN, SORIANO, ESGUERRA
ALLOWABLE DEDUCTIONS
Debtor Corporation shows the f ollowing data during taxable year:
Sales
P500,000
Cost of sales
215,000
Salary expense
120,000
Interest income, net of 20% final tax
24,000
Interest expense
50,000
Rent expense
30,000
Representation expense
20,000
Advertising expense
15,000
Depreciation expense
10,000
23. How much is the deductible interest expense?
a. 50,000
b. 45,200
c. 44,000
d. 2,500
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25. What is the correct amount of itemized deduction?
a. P221,500
c. P255,100
b. P215,000
d. P265,000
d. 6,000
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24. How much is the deductible EAR expense?
a. 20,000
b. 5,000
c. 1,425
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Problem 9
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Problem 10
JLE, a domestic corporation with a total asset (excluding land) amounting to P 200,000,000, has the following data for the
taxable year:
Net income, Philippines
P2,000,000
Net income, Italy
1,300,000
Net income, Australia
1,200,000
Philippine income taxes f or the f irst three (3) quarters
250,000
Income tax paid, Italy
400,000
Income tax paid, Australia
200,000
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26. How much is the tax credit f or f oreign income taxes?
a. P560,000
b. P565,625
c. P600,000
d. 525,000
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27. How much is the Philippine income tax payable?
a. P559,375
b. P1,125,000
c. P309,375
d. 350,000
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Page 6 of 7 | TAX 03
BANGGAWAN, SORIANO, ESGUERRA
ALLOWABLE DEDUCTIONS
Taxes paid:
Other percentage tax
Documentary stamp tax
Capital Gains Tax
Special Assessment
Municipal tax
License tax
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10,000
12,650
15,344
25,000
22,056
500
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Pension expense
Current Service Cost
Past Service Cost
P3,000,000
2,000,000
150,000
50,000
30,000
100,000
150,000
85,550
34,680
70,000
180,000
20,500
65,000
120,000
100,000
275,000
400,000
6,000
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Gross Sales
Cost of Sales
Dividend-f oreign Corporation
Dividends-Domestic Corporation
Interest income on promissory notes
Interest income f rom bank deposits
Interest Expense
Tax expense (see breakdown below)
Bad debts-written of f
Pension expense (see breakdown)
Discount given to Senior Citizen-25%
Other Special deductions under NIRC
Salary of PWD Workers
Productivity incentives
Administrative expenses
Losses
Depreciation
Income Tax payments f or 3 quarters
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Problem 11
The f ollowing information relates to Jabee Corporation, a domestic corporation operating since 2010, f or the year ended
December 31, 2023:
50,000
20,000
d. 342,980 loss
29. How much is the net operating loss carry over f or 2023?
a. 282,636
b. 206,386
c. 222,636
d. 266,386
30. How much is the income tax due f or 2023?
a. 10,000
b. 20,000
c. 11,800
d. 17,700
31. How much is the income tax payable f or 2023?
a. 4,000
b. 14,000
c. 11,700
d. 5,800
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28. How much is the net operating income/loss f or 2023?
a. 282,636 loss
b. 302,636 loss
c. 317,980 gain
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Page 7 of 7 | TAX 03
BANGGAWAN, SORIANO, ESGUERRA
ALLOWABLE DEDUCTIONS
d. 20,000
33. How much is the deductible pension expense?
a. 70,000
b. 7,000
c. 52,000
d. 25,000
34. How much is the deductible tax expense?
a. 45,206
b. 85,550
c. 60,550
d. 50,550
35. How much is the deductible senior citizen discount?
a. 180,000
b. 144,000
c. 45,000
d. None of the choices
36. How much is the total deductible special deductions?
a. 20,500
b. 276,750
c. 240,750
d. 160,250
37. How much is the deductible regular deductions?
a. 1,241,886
b. 1,262,230
c. 1,237,230
d. 1,221,886
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32. How much is the interest expense deductible?
a. 150,000
b. 130,000
c. 117,000
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Problem 12
Astroboy, a retailer of goods, uses the accrual method in reporting his income and expenses. His transactions for the year
2023 show:
January to March:
Sales
900,000
Cost of sales
350,000
Business expenses
150,000
Non operating income
100,000
3,500,000
600,000
300,000
400,000
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July to December:
Sales
Cost of sales
Business expenses
Non operating income
1,100,000
450,000
230,000
150,000
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April to June:
Sales
Cost of sales
Business expenses
Non operating income
38. His annual taxable net income if he avails OSD instead of itemized deduction is?
a. 3,950,000
b. 3,690,000
c. 3,300,000
d. None of the choices
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39. If Astroboy is a Domestic MSME Corporation with total assets (excluding land) amounting t o P90,000,000 and avails
OSD, how much would be the annual taxable net income of Astroboy?
a. 3,110,000
b. 2,850,000
c. 2,460,000
d. None of the choices
40. Assume the same inf ormation in number 39, how much is the income tax payable of Astroboy?
a. 712,500
b. 622,000
c. 570,000
d. None of the choices
-END OF HANDOUT-
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