Archive for March 2018

Juan, a farmer, uses the crop-year method in reporting his income from long-term crops. The following data are relevant to his farming operations in 2017:

Juan, a farmer, uses the crop-year method in reporting his income from long-term crops. The following data are relevant to his farming operations in 2017:

- Sales of crops harvested, P800,000
- Expenses on harvested crops, P300,000
- Expenses on maturing crops, P200,000
- Expenses on newly planted crops, P100,000
- Sales of tee branches for firewood, P40,000

Juan ises the crop year method in reporting crop income. Compute Juan's total income subject to tax



A. P540,000
B. P500,000
C. P340,000
D. P240.000


Answer: A. P540,000

Tomas started raising swine for sale by purchasing 5 gilts and a boar at a total purchase price of P50,000 on January 2016. As of December 31, 2016, Tomas' herd grew to 15 gilts, 2 boars and 20 piglets. The total herd has a fair value of P196,000 when sold as is. During the year, Tomas earned P180,000 from selling piglets. How much should Tomas report as farming income in 2016?

Tomas started raising swine for sale by purchasing 5 gilts and a boar at a total purchase price of P50,000 on January 2016. As of December 31, 2016, Tomas' herd grew to 15 gilts, 2 boars and 20 piglets. The total herd has a fair value of P196,000 when sold as is. During the year, Tomas earned P180,000 from selling piglets. How much should Tomas report as farming income in 2016?




A. P326,000
B. P180,000
C. P 146,000
D. P130,000


Answer: B. P180,000

Hassan leases an office space from Rafi, Inc. in a non- renewable 10-year lease contract. Just after the second year of the lease, Hassan renovated the premises and made improvements at a cost of P1,200,000. These improvements are expected to last for 12 years. Compute Rafi's annual income form the leasehold improvement using the spread-out method

Hassan leases an office space from Rafi, Inc. in a non- renewable 10-year lease contract. Just after the second year of the lease, Hassan renovated the premises and made improvements at a cost of P1,200,000. These improvements are expected to last for 12 years. Compute Rafi's annual income form the leasehold improvement using the spread-out method




A. P50,000
B. P37,500
C. P30,000
D. P20,000


Answer: A. P50,000

Olive enter into a 40-lease contract with Bernice. Per agreement, Olive will construct a building on Bernice's lot and operate the same for 40 years. Ownership of the building will transfer to Bernice upon the termination of the lease. The lease will not commence until the building is completed. Olive completed the building at a total cost of P 40,000,000 om January 1, 2017. The building is expected to be used over 50 years.

Olive enter into a 40-lease contract with Bernice. Per agreement, Olive will construct a building on Bernice's lot and operate the same for 40 years. Ownership of the building will transfer to Bernice upon the termination of the lease. The lease will not commence until the building is completed. Olive completed the building at a total cost of P 40,000,000 om January 1, 2017. The building is expected to be used over 50 years.




A. P200,000
B. P4,000,000
C. P8,000,000
D. 32,000,000


Answer: A. P200,000

Mark comstructs residential properties fro clients and reports income by the percentage of completion method. In 2015, Mark started a P2,000,000 construction contract. Details of his 2015 and 2016 construction follow:

Mark constructs residential properties fro clients and reports income by the percentage of completion method. In 2015, Mark started a P2,000,000 construction contract. Details of his 2015 and 2016 construction follow:

2015. 2016
Annual construction cost. P200K. P800K
Estimated cost to finish. P800K. P200K
Extent of completion. 20%. 80%

Compite the construction income in 2015 and 2016


A. P200,000;P400,000
B. P200,000;P560,000
C. P400,000;P400,000
D. P400,000;P560,000


Answer: A. P200,000;P400,000

Henry accepted a P1,000,000 construction contract in early 2016. As of December 31, Henry incurred total construction costs of P600,000 and estimates additional P200,000 to bring the project to completion. Per independent appraisal, the building is at its 80% stage of completion. Compute Henry's 2016 construction income using the percentage of completion method

Henry accepted a P1,000,000 construction contract in early 2016. As of December 31, Henry incurred total construction costs of P600,000 and estimates additional P200,000 to bring the project to completion. Per independent appraisal, the building is at its 80% stage of completion. Compute Henry's 2016 construction income using the percentage of completion method




A. P40,000
B. P160,000
C. P200,000
D. P400.000


Answer: C. P200,000

Mary is a dealer in real properties. Mary requires 20% down payment, and the balance is payable over 36 monthly installments starting on the last day of the month following the month of sale. Mary sold properties in 2015 and 2016 with terms as follows:

Mary is a dealer in real properties. Mary requires 20% down payment, and the balance is payable over 36 monthly installments starting on the last day of the month following the month of sale. Mary sold properties in 2015 and 2016 with terms as follows:

- House and lot No. 1 was sold for P1,350,000 on November 11, 2015
- House and lot No. 2 was sold for P1,800,000 on July 5, 2016

Both properties were sold at a gross profit rate of 40% based on the sellig price

Compute Mary's geoss income subject to income tax in 2015 and 2016 respectively.


A. P120,000;P720,000
B. P540,000;P864,000
C. P540,000;P720,000
D. P120,000;P864,000


Answer: D. P120,000;P864,000

Lance is a dealer of household appliances. He reported the following in 2015 and 2016:

Lance is a dealer of household appliances. He reported the following in 2015 and 2016:

2015. 2016
Installment sales. P500K. P800K
Cost of installemnt basisP250K. P440K
Collections. P300K. P600K

Lance's 2016 collection is inclusove of P100,000 accounts from 2015

Using the installment method, compute Lance's gross income subject to income tax in 2016



A. P360,000
B. P320,000
C. P275,000
D. P250,000


Answer: C. P275,000

Using the accrual basis of accounting, compute Lance's gross income subject to income tax in 2016


A. P360,000
B. P320,000
C. P275,000
D. P250,000


Answer: A. P360,000

Bright Corporation sold its old warehouse with carrying amount (tax basis) of P600,000 for P1,000,000. A downpayment of 15% was collected on July 1, 2016. Additional P150,000 installment payments were received as of December 31, 2016. Compute the gross profit to be reported for the year 2016

Bright Corporation sold its old warehouse with carrying amount (tax basis) of P600,000 for P1,000,000. A downpayment of 15% was collected on July 1, 2016. Additional P150,000 installment payments were received as of December 31, 2016. Compute the gross profit to be reported for the year 2016




A. P60,000
B. P120,000
C. P150,000
D. P400,000


Answer: D. P400,000

In 2016, Exquisite Inc, sold its parking lot for P2,400,000 payable on installment. The lot was previously acquired for P1,500,000. The buyer has an outstanding unpaid balance of P1,800,000 as of December 31, 2016, Exquisite's year-end. Compute Exquisite's gross income in 2016 using the installment method

In 2016, Exquisite Inc, sold its parking lot for P2,400,000 payable on installment. The lot was previously acquired for P1,500,000. The buyer has an outstanding unpaid balance of P1,800,000 as of December 31, 2016, Exquisite's year-end. Compute Exquisite's gross income in 2016 using the installment method




A. P900,000
B. P675,000
C. P225,000
D. P112,500


Answer: C. P225,000

The P100,000 advances refer to services which will be rendered next year. Total uncollected billing increased from P100,000 on December 31, 2015 to P150,000 on December 31, 2016

Ilagan, Inc. has the following receipts during 2016:

From service billing to clients P400,000
Advances from clients. 100,000
Total cash collection. P500,000

The P100,000 advances refer to services which will be rendered next year. Total uncollected billing increased from P100,000 on December 31, 2015 to P150,000 on December 31, 2016



Compute the gross income using cash basis


A. P550,000
B. P500,000
C. P450,000
D. 400,000

Answer: B. P500,000


Compute the gross income using accrual basis


A. P550,000
B. P500,000
C. P450,000
D. 400,000

Answer: A. P550,000

A taxpayer reported the following data for 2015:

A taxpayer reported the following data for 2015:

- Total net sales made to customers were P2,000,000 in. Ash
- Goods purchased for sale totaled P1,200,000 in cash. Beginning and ending inventory of goods for sale, respectively, were P200,000 and P300,000
- 1-year advanced to rent of P60,000 to apply for 2016 was received from a sublease contract
-P40,000 total interest income from customers promissory note earned P30,000 of this was collected
- Unrealized foreign exchange gains from foreign currency receivables totaled P60,000

Using cash basis, compute the total income subject to income tax


A. P990,000
B. P960,000
C. P750,000
D. P690,000

Answer: A. P990,000

Using accrual basis, compute the total income subject to income tax


A. P1,060,000
B. P1,000,000
C. P960,000
D. 940,000


Answer: B. P1,000,000

Anthodium, Inc. reported the following during the year:

Anthodium, Inc. reported the following during the year:

-P400,000 proceeds of life insurance of an officer where Anghodium is the beneficiary (P600,000 still uncollected.)
-P800,000 interest income, exclusive of P200,000 uncollected and accrued inteest
-P200,000 increase in. Alue of investment in stocks

Compute the gross income under accrual basis



A. P1,400,000
B. P1,200,000
C. P1,000,000
D. P800,000


Answer: C. P1,000,000

Anthodium, Inc. reported the following during the year:

Anthodium, Inc. reported the following during the year:

-P400,000 proceeds of life insurance of an officer where Anghodium is the beneficiary (P600,000 still uncollected.)
-P800,000 interest income, exclusive of P200,000 uncollected and accrued inteest
-P200,000 increase in. Alue of investment in stocks


Compute the gross income under the cash basis.



A. P1,400,000
B. P1,200,000
C. P1,000,000
D. P800,000



Answer: D. P800,000

Effective May 15, 2016, Carlos, Inc. changed its fiscal year ending every April 30 to the calendar year. An adjustment return shall be filed covering the period

Effective May 15, 2016, Carlos, Inc. changed its fiscal year ending every April 30 to the calendar year. An adjustment return shall be filed covering the period




A. January 15 to Drce,ber31, 2016
B. January 1 to April 30, 2016
C. May 1 to December 31, 2016
D. April 30 to December 31, 2016


Answer: C. May 1 to December 31, 2016

Effective July 2, 2016, John Hay Company changed its fiscal year ending every March 31 to another fiscal year ending every August 31. An adjustment return shall be filed covering the period

Effective July 2, 2016, John Hay Company changed its fiscal year ending every March 31 to another fiscal year ending every August 31. An adjustment return shall be filed covering the period




A. July 3 to August 31, 2016
B. April 1 to August 31, 2016
C. April 1 to July 2, 2016
D. April 1 to July 1, 2016


Answer: B. April 1 to August 31, 2016

Effective March 1, 2016, Beneco, Inc. changed its calendar year to a fiscal year ending every June 30. An adjustment return shall be filed covering the period

Effective March 1, 2016, Beneco, Inc. changed its calendar year to a fiscal year ending every June 30. An adjustment return shall be filed covering the period




A. March 1 to June 30, 2016
B. January 1 to June 30, 2016
C. January 1 to March 1, 2016
D. January 1 to December 31, 2016


Answer: B. January 1 to June 30, 2016

Jonah Corporation rports on a calendar year. On August 15, 2016, it stopped business due to persistent losses. Jonah Corporation's last income tax return shall cover

Jonah Corporation rports on a calendar year. On August 15, 2016, it stopped business due to persistent losses. Jonah Corporation's last income tax return shall cover




A. January 1 to December 31, 2016
B. January 1 to August 15, 2016
C. August 15, 2013 to August 15, 2016
D. August 15 to December 31, 2016


Answer: B. January 1 to August 15, 2016

Blirzrieg Corporation started business on April 5, 2016 and opted to report income tax on a fiscal year ending every October 31. Blitzreig's first income tax return shall cover

Blirzrieg Corporation started business on April 5, 2016 and opted to report income tax on a fiscal year ending every October 31. Blitzreig's first income tax return shall cover




A. April 5, 2016
B. April 6, 2016 to October 31, 2016
C. April 5, 2016 to December 31, 2016
D. April 5, 2016 to April 5, 2017


Answer: A. April 5, 2016

Anderson died on march 31,2014. Which is a correct statement?

Anderson died on march 31,2014. Which is a correct statement?




A. Anderson's 2014 income tax return shall cover January 1, 2013 to December 31, 2014
B. Anderson's 2014 income tax return shall cover January 1, 2014 to December 31, 2014
C. Anderson's 2014 income tax return shall cover April 1, 2014 to December 31, 2014
D. Anderson's 2014 income tax return shall cover January 1, 2014 to March 31, 2014


Answer: D. Anderson's 2014 income tax return shall cover January 1, 2014 to March 31, 2014

An individual income taxpayer shall file his or her income tax return on or before the

An individual income taxpayer shall file his or her income tax return on or before the 




A. 15th day of the 4th month of the same calendar year
B. 15th day of the 4th month of the same fiscal year
C. 15th day of the 4th month of the following fiscal year
D. 15th day of the 4th month of the following calendar year


Answer: D. 15th day of the 4th month of the following calendar year

What is not a special feature of regular income taxation?

What is not a special feature of regular income taxation?




A. Final withholding tax at source
B. Annual payment of income tax
C. Use of accounting methods
D. Use of accounting periods


Answer: A. Final withholding tax at source

Statement 1: The excess of mortgage assumed by the buyer over the basis of the properties sold is the amount of the gain of the sale Statement 2: Any collection from an installment contract where the mortgage exceeds the tax basis of the properties received constitutes collection of income

Statement 1: The excess of mortgage assumed by the buyer over the basis of the properties sold is the amount of the gain of the sale
Statement 2: Any collection from an installment contract where the mortgage exceeds the tax basis of the properties received constitutes collection of income


Which statement is true?


A. Statement 1 only
B. Statement 2 only
C. Both statements are true
D. Neither statement is true


Answer: B. Statement 2 only

Under which of the following will short accounting period not arise

Under which of the following will short accounting period not arise




A. Change accounting period by a corporate taxpayer
B. Change of accounting period by an individual taxpayer
C. Death of taxpayer
D. Dissolution and liquidation of a business


Answer: B. Change of accounting period by an individual taxpayer

Which is an incorrect statement regarding the use of accounting period?

Which is an incorrect statement regarding the use of accounting period?




A. The regular accounting period for any taxpayer is 12 months
B. Individual taxpayers are not allowed to report income using fiscal accounting period
C. Corporations may opt to use either calendar year or fiscal accounting period
D. Individuals can either choose the calendar year or fiscal year accounting period


Answer: D. Individuals can either choose the calendar year or fiscal year accounting period

Which is correct regarding the crop year method?

Which is correct regarding the crop year method?




A. Crop year method is accounting period
B. Crop year method recognizes farming income when the planting season commenced
C. Crop year method matching cropping expenses with the income upon harvest
D. Crop year method recognizes cropping expenses when incurred and harvest income when realized


Answer: C. Crop year method matching cropping expenses with the income upon harvest

Leasehold income is recognized over the lease term in

Leasehold income is recognized over the lease term in




A. Outright method
B. Cash basis
C. Spread-out method
D. Percentage of completion method



Answer: C. Spread-out method

Which statement is correct?

Which statement is correct?




A. Dealers of real properties can use the installment method without limitation
B. Non-dealers of properties can use the installment method if initial payment exceeds25% of the selling price
C. Dealers of properties can use the installment method on,y if initial payment does not exceed 25% of the selling price
D. Dealers of personal properties. An use the installment method without limitations


Answer: D. Dealers of personal properties. An use the installment method without limitations

Initial payment means

Initial payment means




A. Downpayment
B. Installment payments, exclusive of downpayment, within the year the instalment sale was made
C. Total collections within one year from the date the installment sale was made
D. Total collections within the year the installment sale was made


Answer: D. Total collections within the year the installment sale was made

Which is not an item of passive income?

Which is not an item of passive income?




A. Royalties
B. Salary
C. Deposit interest income
D. Prizes


Answer: B. Salary

What is capital asset?

What is capital asset?




A. Real properties used in business
B. Personal properties used in business
C. Real properties not used in business
D. Any property, real or personal, not used in business


Answer: D. Any property, real or personal, not used in business

Which is not a feature of final tax?

Which is not a feature of final tax?




A. Covers all capital gains
B. Cover certain passive income
C. Withholding at source
D. One of these



Answer: A. Covers all capital gains

Which is a correct statement regarding income taxes?

Which is a correct statement regarding income taxes?




A. An item of income subjected to final tax can still be subjected to regular tax.
B. An item of income exempted from tax is likewise exempt from capital gains tax and regular income tax
C. An item of income exempted from final tax is nevertheless taxable to regular tax
D. An item of income subjected to the capital gains tax may be subject to regular income tax



Answer: B. An item of income exempted from tax is likewise exempt from capital gains tax and regular income tax

Which is not scheme in taxing income?

Which is not scheme in taxing income?




A. Final income taxation
B. Regular income taxation
C. Capital gains taxation
D. Ordinary gain taxation



Answer: D. Ordinary gain taxation
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