URDANETA CITY UNIVERSITY

San Vicente West, Urdaneta City

 (+6375) 5687612  [email protected]
College of Accountancy and Business Administration
1. Taxation power is the strongest among the inherent powers of the government being its lifeblood. Which of the
following statements is not correct?
a. It could be exercised by the government without a need for legislation.
b. It is still restricted by Constitutional provisions
c. The main goal of its exercise if for revenue
d. It is exercised for the welfare of the majority of the population

2. Taxation power is exclusively legislative in nature. This means that

a. All aspects of taxation should be exercised and administered only by the legislative branch of the
government.
b. This refers to the levying aspect only.
c. This refers to both the imposition and assessment aspect.
d. This refers to the assessment aspect only

3. A law that allows taxes to be paid either in cash or in kind is valid.

a. Yes , because taxes it is the lifeblood of the government
b. No , because it violates the administrative feasibility principle of sound taxation system.
c. No, because assessment, of tax liability is not possible.
d. Yes, because it is a form of tax compromise

4. Tax money collected could be used immediately by the collecting unit to pay its legitimate obligations.
a. Yes, because it has legal basis
b. No, unless it has the approval of its department head
c. Yes, as long as the amount collected is sufficient
d. No, because its spending must be legislated through an appropriation act.

5. In our tax system, we have direct taxes and indirect taxes. Which of the following statements in not correct?
a. Direct taxes are the burden of the same person who is liable to it
b. Indirect taxes could be legally shifted to next taxpayer
c. Direct taxes are the focus of regressive tax system
d. Indirect taxes are the focus of regressive tax system

6. Which of the following is illegal?

a. Indirect double taxation c. Tax avoidance
b. Tax pyramiding d. Tax shifting

7. The Constitution provides "charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, and non- profit cemeteries and all lands, buildings, and improvements actually, directly and
exclusively used for religious, charitable or educational purposes shall be exempt from taxation." This provision
exempts charitable institutions and religious institutions from what kind of taxes?
a. From all taxes c. From Capital gain tax
b. From VAT d. From real property tax

8. Which of the following statements is true?

a. Exemptions should be liberally construed in favor of the taxpayer
b. Exemption from tax includes exemption from special assessment
c. Exemption from tax requires concurrence of majority of members of the Congress
d. Tax exemption as a privilege could be transferred or assigned to next person

9. Under our Income Tax Law, resident citizens are taxable on their income whether earned in the Philippines or
outside the Philippines. If foreign income tax is collected on the same income which such resident citizen
earned outside, is there double taxation?
a. Yes, it is a direct double taxation
b. No, because only one type of tax is collected, income tax
c. Yes, but an indirect double taxation only
d. No, if both Philippine tax and foreign tax collected are for the same period

10. The effect of indirect double taxation could be mitigated by either claiming deduction or applying tax credit. How
should this be applied for income tax paid to foreign country on the same income which was collected with
Philippine income tax?
Statement 1: The taxpayer could claim the foreign income tax paid as deduction and tax credit for the
same taxable year.
Statement 2: Deduction will reduce the taxable amount, and tax credit will reduce directly the amount
of tax liability.
a. Only statement no.1 is correct c. Both statements are correct
b. Only statement no.2 is correct d. Both statements are not correct
 11. The following are restricted for public purposes, but only one is restricted by the “Just compensation “ clause
of the Constitution,
a. Taxation c. power of eminent domain
b. Police power d. power to levy charges

12. In its exercise, the amount imposed depends on whether the activity is useful or not
a. Taxation c. power of eminent domain
b. Police power d. power to levy charges

13. The following inherent powers of the government are applied to the community as whole, except
a. Taxation c. power of eminent domain
b. Police power d. power to levy charges

14. The following are superior to the “non-impairment” clause of the Constitution, except
a. Taxation c. power of eminent domain
b. Police power d. power to expropriate private property

15. Statement 1, Taxation is exclusively legislative as to its administration.

Statement 2, Taxation is territorial in operation.
a. True, true b. True, false c. False, true d. False, false

16. The government is expected to respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values. This statement,
a. Justifies the exercise of taxation power c. Justifies the exercise of police power
b. Restricts the exercise of taxation power d. Restricts the exercise of police power

17. STATEMENT 1, “Marginal Income Earner” shall refer to those individual whose business do not realize gross
sales or receipts exceeding P 100,000 in any month period.
STATEMENT 2, Marginal income earners are exempt from paying percentage taxes and VAT
a. True, true b. true, false c. false, true d. false, false

18. Erlin Da made several purchases of Soriano Mining Co (unlisted) shares at dates after which she received on
February 1, 2019 a 100% stock dividend. Shown below are his purchases:
Lot No. Date Acquired No of Shares Cost purchase
1 3-27-18 200 P100
2 5-19-18 300 P120
3 12-9-18 500 P125
Erlin Da sold 600 shares on January 2, 2019 for P160 per share. She has no sufficient records and could not
identify to what lots the shares came from. How much is the capital gains tax?
a. P14,400 b. P1,250 c. P3,750 d. P4,800

19. In 2017, a resident citizen acquired a residential lot for P1,000,000. In 2018, because of immediate need for
cash, he sold the lot for P800,000, when the zonal value for such type of lot was P2,000,000. For the same
taxable year, how much of the loss from above sale could be claimed as deduction against his reportable
business income?
a.200,000 b. 100,000 c. 50,000 d. none

20. Ex constructed a house at a cost of P500,000 in 2005. In 2018, he sold the house for P2,000,000. At the time
of sale, its fair market value was P2,500,000. Two months later, he bought a new house for P1,900,000 and
within 30 days from the said date, he notified the BIR of his intention to avail of the tax exemption on such
transaction. How much is the capital gains tax due on the sale of the property?
a. 120,000 b. P150,000 c. 7,500 d.
21. The minimum wage of X for the year amounted to P100,000, inclusive of P10,000 overtime pay and P5,000
holiday pay. What amount of his compensation income is taxable?
a. P100,000 b. P85,000 c. P15,000 d. NIL

DATA FOR THE FOLLOWING QUESTIONS

The managerial employee received during the year a total of P162,500 cash car allowance from his employer during
2018.
22. From the above, how much is his compensation income?
a. 250,000 b. 162,500 c. 52,000 d. none

23. From the above, how much is his final tax?

a. 87,500 b. 56,875 c. 80,000 d. none

GIVEN FOR THE SUCCEEDING QUESTIONS

The minimum wage earner reported the following for the year:
-Minimum wage P75,000
- deminimis benefit within the allowable limit 10,000
- deminimis benefit in excess of the limit 5,000
- 13th month pay 7,000
- bonus 20,000
24. How much of the above is tax exempt?
a. 117,000 b. 75,000 c. 5,000 d. NIL

25. How much of the above is taxable?

a. 77,000 b. 82,000 c. 92,000 d. NIL

26. In 2018, the following gross receipts were reported by the resident citizen:
 Refund of last year’s income tax, P2,500
 Return of insurance premium as its cash surrender value, P180,000
 Lotto winnings, P10,000
 Professional fee, net of 15% expanded withholding tax, P637,500
How much is his gross reportable income?
a. 752,500 b. 750,000 c. 760,000 d. 637,500

27. An ordinary employee, resident citizen reported the following gross receipts:
 Minimum wage P 75,000
 13th mo. Pay 6,250
 Holiday pay 15,000
 Hazard pay 2,500
 Proceeds of wife’s life insurance, 500,000
How much is his gross reportable income?
20,000 b. 15,000 c. 5,000 d. nil

28. Al Christian owns a residential house which was allowed to be used by the manager. The fair market value of
which as determined by the Commissioner of Internal Revenue is P6,800,000 while the value per city
Assessor is P5,000,000. How much is the total fringe benefit tax?
a. 80,000 b. 91,538.46 c. 1,600,000 d. 1,830,769.23

29. In 2017, Angel purchased a brand new car for use by its marketing manager and another residential house in
2018 for P4,000,000 when its fair market value was 4,760,000 and transferred ownership thereof in the name
of the manager. The car costing P340,000 was registered in the name of the manager. How much is the total
fringe benefit tax?
a. 2,400,000 b. 2,746,154 c. 1,700,000 d. 0

30. Miguel Santos is indebted to Emily Guidote. Because of his inability to pay off the debt, he was asked to take
care of her kids for 2 months. Thereafter, Emily gave him P15, 000 cash and condoned the debt amounting to
P25,000. How much income should be declared by Miguel?
a. P15,000 b. P25,000 c. P40,000 d. None

31. Cj was sent by her boss to cover an incident in Baguio City. Her boss gave him P4000 for the expenses. Upon
arrival in manila he was confined and diagnoses to have dengue. Cj was forced to leave for 15 days. Despite
of his absence he was paid a complete salary in the amount of P20,000. How much income is subject to income
tax?
a. P24, 000 b. P4, 000 c. P20, 000 d. None

32. In 2018, Eternity Company granted a loan of 220,000 with an interest of 7% per annum. The loan is payable in
9 months. The acceptable interest rate in the Philippines is 12%. How much is the fringe benefit tax?
a. P3,822.35 b. P4,442.31 c. P118,461.53 d. P59,230.77

33. Mr. Kentaki, single, had the following income in 2018:

Business income –Philippines 150,000
th
13 month Pay 12,000
Rent income – Canada 50,000
Rent income – Quezon City 125,000
Prizes from Lotto - USA 200,000
Property inherited from his father 350,000
Income from property Inherited by Mr. Kent’s Father 120,000
How much is the amount of income subject to regular tax?
a. P1,207,000 b. P845,000 c. P645,000 d. P995,000

34. BORGOY acquired his old principal residence in 2002 at a cost of P4M. He sold the said property on January
1, 2018 for P16M, although the FMV on that date was P20M. Within the reglementary period BORGOY
acquired his new principal residence for P12M. Which of the following is incorrect?
a. BORGOY has to pay capital gains tax of P300,000.
b. The cost basis for the new principal residence is P5M.
c. The unutilized amount of the gross selling price is P4M.
d. If the proceeds were not used to buy a new principal residence, the capital gains tax should have been
P1.2M
 35. Which passive income is subject to regular tax?
a. Dividend income from foreign corporation c. Royalties from musical composition
b. P10,000 winnings d. Interest on Peso bank deposit

36. Which is not part of de minimis benefits?

a. Clothing allowance c. Monetized unused vacation leave credits
b. Actual medical benefits d. 13th month pay

37. The de minimis benefits not exceeding their thresholds are

a. exempt from income tax. c. subject to regular tax
b. subject to fringe benefits tax. d. deductions from gross income.

38. Which of the following phrases is not an exemption criterion for purposes of the fringe benefit tax?
a. Convenience of the employer
b. Necessary for the business of the employer
c. In furtherance of employee goodwill
d. For the furtherance of the employer’s business

39. What percentage of the depreciation value is considered fringe benefit in the free usage of employer’s real
properties?
a. 5% b. 20% c. 50% d. 100%

40. An employer transferred a title over property to the employee. What percentage the benefit is considered for
purposes of the fringe benefit tax?
a. 100% b. 20% c. 50% d. 5%

41. The actual value of benefits realized by the managerial or supervisory employee is referred to as the
a. monetary value c. grossed-up monetary value.
b. fair value d. annual depreciation value.

42. Which is subject to fringe benefits tax?

a. Premiums of employee group insurance
b. Expenses of business travels
c. Housing for an employee to ensure his immediate availability
d. Housing for the family members of an employee

43. An employer pays the P10,000 monthly residential rental of his managerial employee. Compute the quarterly
monetary value.
a. P15,000 b. P10,000 c. P30,000 d. P40,000

44. Maasin Carbon Plant acquired a P 1,000,000-motor vehicle for the use of its field engineer, a plant supervisor,
assigned to a very remote facility from town. Compute the monetary value of benefits subject to tax.
a. P 1,000,000 b. P 200,000 c. P 100,000 d. P 0

45. ABC Company owns a residential lot which was purchased for P 800,000, eight years ago. The lot was sold to the
supervisor for only P 500,000 when it was worth P 1,200,000.

Compute the fringe benefit expense.

a. P 300,000 c. P 700,000
b. P 400,000 d. P 0

----End----

Prepared by:

Lindbergh Lendl S. Soriano, CPA

Program Head, BS Accountancy

Noted:

Remedios A. Palaganas, CPA, MBA

Dean, College of Accountancy and Business Administration