CPA Review School of the Philippines
Manila
TAXATION
First Preboard Examination Solutions
Nos. 1 – 3 Solutions:
Gross receipts (business)
Less: Itemized deductions
Taxable net income
Tax (table)
Less Credits:
(1) Excess tax credits
(2) CWT Withheld
(3) Taxes Paid in previous quarters
Tax Payable
1.C
1st Quarter
P 750,000
(150,000)
600,000
P
80,000
2nd Quarter
P 1,500,000
(300,000)
1,200,000
P 250,000
3rdQuarter
P 2,250,000
(450,000)
1,800,000
P 430,000
(75,000)
(150,000)
(5,000)
P
5,000 2.C P 95,000 3.B
No. 4 Solution: A
Gross compensation (Gross of CWT, net of SSS, Pagibig premiums,
gross of 13th mo. pay & other benefits)
Less: 13th month pay and other benefits
Taxable compensation income
Add: Income from business:
Taxable gross receipts
P
Less: Itemized deductions
Total taxable net income
Tax (table)
Less: Tax credits
(1) Excess tax credits
(2) CWT Withheld (EWT on professional income)
(On Compensation)
(3) Taxes paid in previous quarters
Tax Payable
(225,000)
(100,000)
P 105,000
Annual
P
894,400
P
3,000,000
(600,000)
(65,000)
829,400
2,400,000
P 3,229,400
883,408
0.00
(300,000)
(75,000)
(205,000)
P 303,408
Nos. 5 – 7 Solutions:
Gross receipts in quarter
Add: Non-operating income
Total income for the quarter
Add: Total income for the previous quarter
Cumulative taxable income as of this quarter
Less: Amount allowed as deduction
Taxable Income
Tax rate (8%)
Tax due
Less tax credits:
(1) Excess tax credits
(2) CWT Withheld
(3) Taxes paid in previous quarters
Tax still due or tax payable
1|Page
1st Quarter
P 750,000
P 750,000
P 750,000
P 750,000
8%
P 60,000
2nd Quarter
P 750,000
P 750,000
750,000
P 1,500,000
P 1,500,000
8%
120,000
3rdQuarter
P 750,000
P 750,000
1,500,000
P 2,250,000
P 2,250,000
8%
180,000
(75,000)
P (15,000)
5. B
(150,000)
P (30,000)
6. D
(225,000)
P (45,000)
7. C
No. 8 Solution: B
Income tax on compensation income:
Gross Compensation (Gross of CWT, net of SSS, Pagibig premiums,
gross of 13th month pay and other benefits)
Less: Exclusionary amount of the 13th month pay and other benefits
Taxable compensation income
Tax on 800,000
Tax on 29,400 @ 30%
Annual
P 894,400
130,000
8,820
Income tax on business income:
Gross Receipts
Add: Non-operating income
Taxable business income
Tax rate @ 8%
P
(65,000)
829,400
P
138,820
P 3,000,000
P 3,000,000
P 240,000
Total income tax due
Less: Tax credits
(1) Excess tax credits
(2) CWT Withheld (EWT and Compensation)
(3) Taxes paid in previous quarters
Tax still due or tax payable
P
378,820
(375,000)
P
3,820
ALTERNATIVE SOLUTION: {138,820 - CWT Compensation 75,000 – Excess CWT 2% 60,000}
Nos. 9 – 28:
9. B
10. A
11. B
12. C
13. A
14. A
15. B
16. B
17. B
18. A
19. C
20. A
21. A
22. D
23. C
24. D
25. D
26. C
27. A
28. A
No. 29 Solution: B
Gross income
Deduction
Taxable income
Income tax
MCIT
Excess MCIT
Tax due
2018
P 1,000,000
950,000
P
50,000
2019
P 2,000,000
2,100,000
P
-
2020
P 1,500,000
1,200,000
P 300,000
15,000
20,000
5,000
20,000
0
40,000
40,000
40,000
55,000
3,000
(45,000)
P 10,000
P
P
No. 30 Solution: C
Rent
Lease improvement:
Cost
Accumulated Depreciation
Book Value of improvement
Realized Gain [200,000/40 X 20]
Realized gain in 20th year
TOTAL
2|Page
P 100,000
P 1,000,000
(400,000)
P
600,000
(100,000)
500,000
5,000
P 605,000
No. 31 Solution: B
Rent expense
Depreciation expense
Loss of improvement [1,000,000-500,000]
TOTAL
P 100,000
25,000
500,000
P 625,000
No. 32 Solution: D
Net income
Dividends domestic corporation
Provision for bad debts
Rent collected
Reverse tax benefit rule on write-off
Reverse tax benefit rule on refund
Philippine interest from bank
Taxable income
P 500,000
(30,000)
10,000
50,000
(30,000)
(15,000)
(80,000)
P 405,000
No. 33 - 35 Solution:
33. B
34. A
35. C
2019
P 2,000,000
(1,940,000)
P
60,000
18,000
P
40,000
22,000
Gross income
Allowable deduction
Taxable Income
NIT
MCIT
EXCESS MCIT
TSD
2020
P 3,000,000
(3,100,000)
P
0
0
45,000
45,000
2021
P 4,000,000
(3,500,000)
P 400,000
100,000
40,000
(67,000)
P
33,000
Nos. 36 – 40:
36. B
39. A
No. 41 – 44 Solution:
41. C
44. B
37. A
40. A
38. C
42. C
43. B
Gross receipts
Less: Cost of services
Gross income from operations
Less: Itemized Deductions
Rental expense
3% OPT
Net income from operations
Add:
Share in GPP net income
Non-operating income
Net taxable income
Tax (table)
Less Credits:
(1) Excess tax credits
(2) Tax payments for previous quarters
(3) CWT
Tax Payable
3|Page
1st Quarter
2nd Quarter
600,000
600,000
1,200,000
1,200,000
1,800,000
1,800,000
(60,000)
(18,000)
522,000
(120,000)
(36,000)
1,044,000
(180,000)
(54,000)
1,566,000
-
3rd Quarter
25,000
547,000
66,750
-
0
1,044,000
203,200
0
1,566,000
359,800
(17,000)
(60,000)
0
(17,000)
0
(120,000)
66,200
(17,000)
(66,200)
(180,000)
96,600
Nos. 45 – 47 Solution:
45. C
46. C
47. A
Annual
Gross compensation income
Less: Exempt compensation:
13th month pay and other benefits
De minimis fringe benefits
Mandatory contributions
Taxable Compensation income
Add: Income from business:
Gross receipts
Less: Cost of services (0 if OSD)
Gross income from operations
Itemized Deductions:
Rental expense
OPT
Net income from operations
Add: Non-operating income
Share in GPP net income
Total taxable income
385,162
(14,062)
(4,732)
(3,980)
362,388
2,400,000
2,400,000
(240,000)
(72,000)
2,088,000
22,000
-
Tax (table)
Less Credits:
(1) Excess tax credits
(2) Tax payments for previous quarters
(3) CWT for previous quarters (Form 2307)
(4) CWT for this quarter: Form 2307
Form 2316
Tax Payable
2,110,000
2,472,388
641,164
(17,000)
(162,800)
(180,000)
(60,000)
(22,477)
198,887
No. 48 Solution: A
Gross compensation income
Less: Exempt compensation:
SSS premiums, Pag-ibig, and union dues
13th month pay and other benefits
Fringe benefits
Taxable Compensation income
Nos. 49 – 50
49. C
850,000
6,000
90,000
4,800
(100,800)
749,200
50. D
An MWE, who also earns income from trade or business, shall be considered a mixed
income earner.
His minimum wage shall remain to exempt from tax.
If qualified, he may choose his income from trade or business to be taxed under the 8%
option. However, because he is considered a mixed income earner, he will not be allowed
the ₱250,000 deduction in computing the base for the 8% tax.
4|Page
No. 51 – 58 Solutions:
51. A
54. C
57. C
52. A
55. B
58. A
53. C
56. D
Net of FT
75,000
5,000
Royalty income from book
Jollibee dividend
Total
Gross of FT
83,333
5,556
FT
8,333
556
8,889
Solution (number 51-58)
Annual
Rental receipts, gross of CWT
Less: Cost of services (0 if OSD)
Gross income from operations
Less: OSD (40%)
Net income from operations
Add: Non-operating income:
Interest income from mother
Microsoft dividend
LT capital gain
ST capital loss
Share in GPP net income
Total taxable income
600,000
0
600,000
(240,000)
360,000
25,000
75,000
45,000
(13,000)
Tax (table)
Less Credits:
5% CWT on rental income
Tax paid in 3 previous quarters
Tax Payable
32,000
492,000
53,000
30,000
16,700
(46,700)
6,300
No. 59 A
No. 60 D
This is Housing (Case 6) in the list of fringe benefits given to managerial or supervisory
employees. These benefits are not taxable to the employee. Though they may benefit the
employee, they are primarily given for the benefit and convenience of the employer.
No. 61 Solution: C
(a) FWT on service fee
Service fee
FT rate
600,000
25%
(b) FBT
Hotel bills
Grossed up value (÷ 75%)
FBT rate
75,000
100,000
25%
Nos. 62 – 66
62. C
65. C
5|Page
63. B
66. A
150,000
25,000
175,000
64. B
No. 67 Solution: D
Solution:
Total compensation income
Add: Overtime, night shift differential,
hazard, and holiday pay
Less: Mandatory contributions
13th month pay
Compensation income, net
180,000
160,000
340,000
3,000
10,000
(13,000)
327,000
Note: Net compensation income is still exempt even if it exceeded the ₱250,000
non-taxable income threshold as the same was received by the taxpayer as a
minimum wage earner.
No. 68 Solution: A
Total compensation income
Less: Exclusionary amount of the
13th month pay and other benefits
Taxable compensation income
Add: Taxable income from business:
Gross Sales
Less: Cost of sales
Gross income
Less: Operating expenses
Net income from operations
Add: Non-operating income
Total taxable income
Tax on
Tax on
2,000,000
2,660,000
4,660,000
x
3,000,000
(90,000)
2,910,000
2,000,000
(300,000)
1,700,000
(180,000)
1,520,000
230,000
=
=
32%
1,750,000
4,660,000
490,000
851,200
1,341,200
No. 69 Solution: A
Total compensation income
Less: Exclusionary amount of the
13th month pay and other benefits
Taxable compensation income
Add: Taxable income from business:
Gross Sales
Less: Cost of sales
Gross income
Less: OSD
Net income from operations
Add: Non-operating income
Total taxable income
Tax on
Tax on
2,000,000
2,340,000
4,340,000
3,000,000
(90,000)
2,910,000
2,000,000
0
2,000,000
(800,000)
1,200,000
230,000
x 32%
No. 70: B
The End.
6|Page
=
=
1,430,000
4,340,000
490,000
748,800
1,238,800