TAXATION GUDANI/NARANJO/SIAPIAN

FIRST PRE-BOARD EXAMINATION August 6, 2022

Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of
70 items only. The exam is good for three (3) hours. Good luck!

Use the tax tables, if necessary:

GRADUATED TAX TABLE UNDER TRAIN LAW (January 1, 2018 to December 31, 2022)

Over But not over The tax shall be Plus Of excess over
250,000 0 0 -
P 250,000 400,000 0 20% P 250,000
400,000 800,000 30,000 25% 400,000
800,000 2,000,000 130,000 30% 800,000
2,000,000 8,000,000 490,000 32% 2,000,000
8,000,000 2,410,000 35% 8,000,000

SCHEDULE OF EXPANDED WITHHOLDING TAX (EWT)

Income Payment EWT Income Payment EWT

Professional/Management/Consultancy Gross receipts Purchase of goods or 1% - goods
fees (Individual) 3M or below - properties by Top 2% -
5% Withholding Agents service
Gross receipts (TWA) -
over 3M or
VAT-reg – 10%
Professional/Management/Consultancy Gross receipts Partners in general 720,000 or
fees (Non-Individual) 720,000 or professional less -10%
below - 10% partnerships Above
Gross receipts (drawings, advances, 720,000 –
over 720,000 – sharings, allowances, 15%
15% etc.)
Contractors/subcontractors (security, 2% Commission (if not 10%
janitorial, etc.) employee)
Director’s fees (if not employee) 10% or 15% Income distributed to 15%
(720,000 beneficiaries of
threshold) estates/trusts
Rental 5%

Page 1 of 15
 REVISED WITHHOLDING TAX TABLE (COMPENSATION)

Effective January 1, 2018 to December 31, 2022

DAILY 1 2 3 4 5 6
Compensation 685 and 685-1,095 1,096-2,191 2,192-5,478 5,479-21,917 21,918 and
Range below above
Prescribed 0 0 82.19 356.16 1,342.47 6,602.74
Withholding + 20% over + 25% over + 30% over + 32% over + 35% over
Tax 685 1,096 2,192 5,479 21,918
WEEKLY 1 2 3 4 5 6
Compensation 4,808 and 4,808-7691 7,692-15,384 15,385-38,461 38-462- 153,846 and
Range below 153,845 above
Prescribed 0 0 576.92 2,500 9,423.08 46,346.15
Withholding + 20% over + 25% over +30% over + 32% over + 35% over
Tax 4,808 7,692 15,385 38,462 153,846
SEMI- 1 2 3 4 5 6
MONTHLY
Compensation 10,417 and 10,417-16,666 16,667-33,332 33,333-83,332 83,333- 333,333 and
Range below 333,332 above
Prescribed 0 0 1,250 5,416.67 20,416.67 100,416.67
Withholding + 20% over + 25% over + 30% over + 32% over + 35% over
Tax 10,417 16,667 33,333 83,333 333,333
MONTHLY 1 2 3 4 5 6
Compensation 20,833 and 20,833-33,332 33,333-66,666 66,667- 166,667- 666,667 and
Range below 166,666 666,666 above
Prescribed 0 0 2,500 10,833.33 40,833.33 200,833.33
Withholding + 20% over + 25% over + 30% over + 32% over + 35% over
Tax 20,833 33,333 66,667 166,667 666,667

1. S1: ABC corporation, a domestic corporation whose primary function is to sell gravel and sand, has an
Income Tax Payable amounting to P 1,000,000 due on April 15, 2022. On the other hand, the Government
owes ABC Corporation P 1,000,000 due also on April 15, 2022, for the supplies that it bought to the latter for
the construction of its projects. Since both are debtors and creditors of each other and both debts are due
and demandable on April 15, 2022, legal compensation may take place on the said date.
S2: A new tax law was passed which has a retroactive application. ABC Corporation, a domestic corporation,
assailed the validity of the said tax law on the ground that taxes can only be applied prospectively and cannot
be applied retroactively. ABC Corporation is correct as tax laws under our laws, can only be applied
prospectively and not retroactively.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

2. S1: St. Augustine Church, a catholic church in Manila, deposited money in BPI-Morayta which was given to it
by some of its donors. After a month, the money earned an interest income amounting to P 5,000. The
interest income is exempt from tax.
S2: Charitable contributions given to St. Augustine Church can be claimed as deductions from gross income
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

Page 2 of 15
3. S1: The salaries of the President of the Philippines are tax-exempt.
S2: The salary of the Commissioner of Internal Revenue is exempt from income tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

4. S1: National Taxes exclude taxes under the Local Government Code.
S2: National Internal Revenue Taxes include local taxes.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

5. S1: The National government, including its political subdivisions, has the power to tax inherently.
S2: The President has the power to impose tax on digital services as a matter of sound fiscal policy.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

6. Nicanor, a Filipino amateur boxer, joined an Olympic qualifying tournament held in Tokyo, Japan, where he
won the gold medal. As a result, the Philippine Government, through the Philippine Olympic Committee,
awarded him a cash prize amounting to P1,000,000.00 and several private companies in the Philippines gave
him cash in a total amount of P 10,000,000. Upon receipt, he went to a casino in Manila and won the
P20,000,000.00 jackpot in the slot machine. The next day, he went to a nearby Lotto outlet and bought a
Lotto ticket which won him a cash prize of P5,000
S1: The cash prize received by Nicanor from the Philippine Olympic Committee is not subject to income tax.
S2: The cash received by Nicanor from several private companies is excluded from the computation of his
gross income.
S3: The winnings from the casino in Manila worth P 20,000,000 is subject regular income tax.
S4: The winnings from lotto worth P 5,000 is exempt from income tax.
a. Only S1 is false
b. Only S2 is false
c. Only S3 is false
d. All is true

7. Nicanor is an employee of ABC Corporation. In the same taxable year, he resigned from ABC Corporation
and transferred to XYZ Corporation. XYZ Corporation has made the correct withholding on his total
compensation during the year.
S1: Nicanor is not required to file an Income tax return if he is a minimum wage earner.
S2: Nicanor is exempt from filing an Annual Income Tax Return because he is qualified for substituted filing.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

8. S1: The NIRC requires that the 10-year requirement for tax-exempt retirement benefits should be
uninterrupted.
S2: The tax-exempt retirement benefits can be availed of by official or employee only once in his lifetime.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

Page 3 of 15
9. S1: In general, Proprietary Educational Institutions shall be taxed at a preferential ten percent (10%) income
tax rate (1% beginning July 1, 2020, until June 30, 2023).
S2: State universities and colleges are exempt from income tax.
S3: Non-stock, Non-profit Educational Institution whose net income or assets accrue/inure to or benefit any
member or specific person shall be taxed at a preferential ten percent (10%) income tax rate (1% beginning
July 1, 2020, until June 30, 2023).
a. Only S1 is false
b. Only S2 is false
c. Only S3 is false
d. All is true

10. At the age of 23, Nicanor passed the CPALE in 1980 and was immediately hired as Junior Auditor of BNA
and Co. In 1984, he resigned and transferred to ABC Corporation in Australia as Senior Auditor. In 2005, he
returned to the Philippines and work again with BNA and Co. but this time as Senior Manager of the
Partnership. In 2008, he transferred to XYZ Corporation and work there as Chief Financial Officer. In 2014,
he again returned to BNA and Co. and work there as a Partner until his retirement in 2017 at the age of 60.
The BNA and Co., has a reasonable private pension plan and is registered with the Bureau of Internal
Revenue.
S1: The retirement pay received by Nicanor from BNA and Co., is not taxable.
S2: Supposing BNA and Co., has no reasonable pension plan that is registered with the BIR, the retirement
pay received by Nicanor from BNA and Co., is not taxable.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

11. S1: If compensation under employer-employee relationship is an item of gross income, it means that
transportation, rental, and other expenses of an employee can be deducted from the salaries.
S2: All deductible amounts from gross income must be based on actual expenses incurred by the taxpayer.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

12. S1: All expenses for entertainment, amusement and recreation are deductible.
S2: Any income tax paid by a resident citizen or domestic corporation can be claimed either as a tax credit
or an expense at the option of the taxpayer.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

13. S1: Under CREATE Law, the interest expense of a domestic corporation which is subject to 25% corporate
income tax rate shall be reduced by an amount equivalent to twenty percent (20%) of interest income
subjected to final tax (arbitrage).
S2: Under CREATE Law, the interest expense of a domestic corporation, which is subject to 20% corporate
income tax rate, will be deducted from its gross income in its full amount since there is no difference in the
income tax rate on the taxable income (20%) with the tax rate applied on the interest income subjected to
final tax (20%).
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

Page 4 of 15
14. Which of the following is not a requisite for a business expense to be deductible?
S1: It must be reasonable
S2: It must be paid during the taxable year
S3: The withholding tax otherwise required have been deducted and remitted to the BIR
S4: It must be ordinary and necessary
a. Only S1
b. Only S2
c. Only S3
d. Only S4
e. None of the above

15. RSDV Corporation, a domestic corporation, owns 20% of the outstanding shares of UK Corporation, a non-
resident foreign corporation (NRFC) since August 1, 2015. On May 1, 2021, it received amounting to P
1,000,000 from the said NRFC. On September 1, 2022, RSDV Corporation utilized P 800,000 for its dividend
payments. On January 1, 2023, it utilized the remaining P 200,000 for its working capital requirements.
S1: The P 800,000 portion of dividend income shall be treated as tax exempted since this was properly
utilized within 2022.
S2: The P 200,000 portion of dividend income shall be declared as taxable income for the taxable year 2021,
subject to surcharges, interest, and penalty since it was not utilized within the next taxable year, which is
2022.
S3: The P 1,000,000 dividend income is exempted from income tax, as all the conditions for a foreign sourced
dividends received by a domestic corporation to be exempted from income tax are present in this case.
a. Only S1 is false
b. Only S2 is false
c. Only S3 is false
d. All is true

16. Statement 1: Gain realized from the sale, exchange, or other disposition of real property not located in the
Philippines and is classified as ordinary asset, by resident citizens or domestic corporations shall be subject
to the regular income tax.
Statement 2: Gain realized from the sale, exchange, or other disposition of real property not located in the
Philippines and is classified as capital asset, by resident citizens or domestic corporations shall be subject
to capital gains tax.
a. Both statements are true
b. Both statements are false
c. Statement 1 is true but, Statement 2 is false
d. Statement 2 is true but, Statement 1 is false

17. Statement 1: Gain realized from the sale, exchange, or other disposition of real property not located in the
Philippines and is classified as ordinary asset, by non-resident citizens, alien individuals and foreign
corporations shall be subject to the regular income tax.
Statement 2: Gain realized from the sale, exchange, or other disposition of real property not located in the
Philippines and is classified as capital asset, by non-resident citizens, alien individuals and foreign
corporations shall be subject to the regular income tax.
a. Both statements are true
b. Both statements are false
c. Statement 1 is true but, Statement 2 is false
d. Statement 2 is true but, Statement 1 is false

18. S1: ABC Corporation, a domestic corporation, sold its land and building used in business, located in
California, USA to CSA Corporation, a non-resident foreign corporation doing business in the USA. The sale
of property is subject to regular income tax.
S2: Nicanor, a resident citizen, sold his land and building (which he inherited from his parents who lived in
the USA) located in California, USA to CSA Corporation, a non-resident foreign corporation doing business in
the USA. The sale of property is subject to capital gains tax.

Page 5 of 15
 S3: ABC Corporation, a resident foreign corporation, sold its land and building used in business, located in
California, USA to CSA Corporation, a non-resident foreign corporation doing business in the USA. The sale
of property is subject to regular income tax.
S4: Nicanor, a non-resident citizen, sold his land and building (which he inherited from his parents who lived
in the USA) located in California, USA to CSA Corporation, a non-resident foreign corporation doing business
in the USA. The sale of property is subject to regular income tax.
a. Only S1 is true
b. Only S1 and S2 are true
c. Only S1 and S3 are true
d. All is false

19. S1: Non-stock, non-profit organizations under the NIRC are still subject to income tax on their income of
whatever kind and character from any of their properties (real or personal) or from any other activity
conducted for profit regardless of the disposition of such income.
S2: Non-stock, non-profit educational institutions under the NIRC are not subject to income tax on their
income received from profit activity provided the income were used for educational purposes for which they
were organized and operating.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

20. The following are not subject to income tax, except:

S1: SSS and GSIS
S2: Philippine Health Insurance Corporation (PHIC)
S3: Professional Regulations Commission (PRC)
S4: Philippine Amusement and Gaming Corporation (PAGCOR)
a. Only S1
b. Only S2
c. Only S3
d. Only S4
e. S3 and S4

21. S1: ABC Corporation paid its monthly rental amounting to P 100,000 to XYZ Corporation. The income
payment is subject to creditable withholding tax.
S2: ABC Corporation hired the services of VCA and Co., CPAs an accounting and taxation firm. The former
paid P 100,000 for the services of the latter. The income payment is not subject to creditable withholding tax
(EWT) as ABC Corporation is not classified by the BIR as Top Withholding Agent.
S3: Sale of real property classified as capital assets by ABC Corporation to Nicanor is subject to creditable
withholding tax.
a. Only S1 is true
b. Only S2 is true
c. Only S3 is true
d. All is false

22. S1: Compensation of the supervisory and managerial employee is subject to fringe benefit tax.
S2: Fringe benefit received by a rank-and-file employee is subject to fringe benefit tax.
S3: The monetary value of the housing benefits received by a managerial or supervisory employee shall
always be recognized at 100% of the value of the benefits.
a. Only S1 is true
b. Only S2 is true
c. Only S3 is true
d. All is false

Page 6 of 15
23. S1: All de minimis benefits within the ceiling under the rules given by the employer to its employees shall not
be deductible from the employer’s gross income as the de minimis benefits received by the employees are
exempted from income tax.
S2: Exempt fringe benefit is likewise exempt from any other form of income tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

24. Nicanor, a waiter of Samyung Sherepyan Restaurant (SSR), received a total amount of P 4,000 as tips and
gratuities from the customers of SSR.
S1: The tips and gratuities received by Nicanor is taxable as an item of gross income.
S2: The tips and gratuities received by Nicanor shall be subject to withholding tax on compensation.
S3: The tips and gratuities received by Nicanor is considered passive income.
a. Only S1 is true
b. Only S2 is true
c. Only S3 is true
d. All is false

25. Proceeds of insurance taken by ABC Corporation on the life of Nicanor, Chief Financial Officer of the
company, to indemnify Inday, the wife and only beneficiary of Nicanor against loss in case of his death is:
S1: Exempt from income tax
S2: The premium paid is exempt from income tax, but the excess of premium received by Inday upon death
of Nicanor is taxable as part of her gross income.
S3: The whole amount is part of gross income subject to regular income tax
a. Only S1 is true
b. Only S2 is true
c. Only S3 is true
d. All is false

26. Which of the following separation pay is most likely to be subjected to income tax?
S1: Pay by reason of death
S2: Pay by reason of other physical disability
S3: Pay by reason of sickness
S4: Pay by reason of redundancy or bankruptcy
a. S1
b. S2
c. S3
d. S4

27. Santa Maria College, Inc. a proprietary educational institution, spent P 20,000,000 for the construction of a
new school building. The estimated useful life of the building is 50 years. The P 20,000,000 spent by the
proprietary educational institution:
a. Must be claimed as expense in the year of completion.
b. Can be capitalized and be claimed annual depreciation over the 50 years.
c. Can be capitalized or expensed outright at the option of Santa Maria College, Inc.
d. Can be capitalized and expensed outright at the option of the Bureau of Internal Revenue.

28. The following are examples of corporate expenses deductible from gross income, except:
a. Representation expenses incurred by Nicanor for ABC Corporation to promote the latter’s business.
b. Facilitation expense to a government official to ensure approval of its application
c. Expenses paid by GHI Corporation to an advertising firm in order to create a favorable image for the
corporation.
d. Premiums on group life insurance paid by QRS Corporation covering the life of all its employees

Page 7 of 15
29. Which of the following income derived from sources within the Philippines by a resident citizen is not subject
to graduated income tax rate?
a. Bequests, legacies or devises
b. Salary of Nicanor, a managing partner of ABC and Co., CPAs, a general professional partnership
c. Prizes from singing contest held in Tondo Manila received by Inday amounting to P 5,000
d. Fringe benefits received by Tony, Accounting Clerk of XYZ Corporation.

30. S1: Under CREATE LAW, in tax-free exchanges, prior BIR confirmation or tax ruling shall be required for
purposes of availing of the tax exemption.
S2: For purposes of tax-free exchanges, control shall mean ownership in a corporation after the transfer of
property possessing at least 51% of the total voting power of all classes of stocks entitled to vote. T
a. Only S1 is true c. Both are true
b. Only S2 is true d. Both are false

31. Congress can exercise the following powers, except:

a. Levy taxes upon persons, properties or rights
b. Approve government budget
c. Provide fiscal incentives to businesses
d. Implement tax law to ensure proper enforcement

32. S1 – If taxpayer is exempt from taxation, he/she/it is not required to file returns
S2 – If there is no tax due, the taxpayer is not required to file returns?
a. S1 is true c. Both are true
b. S2 is true d. Both are false

33. It is an electronic certification issued by the Commissioner or his duly authorized representative attesting
that the transfer has been reported and the taxes have been fully paid.
a. Certificate Authorizing Registration c. Letter of Authority
b. Certificate of Authority to Register d. Certificate of Registration

34. If the BIR will conduct surveillance operations, stock-taking or tax compliance verification drives, the
Commissioner or his authorized representative should issue:
a. Mission Order c. Authorization Letter
b. Letter of Authority d. Letter Notice

Use the following information for the next five (5) items:

Nicanor, self-employed individual, gave you the following financial information of his business for the taxable
year 2022:

Gross receipts Php 2,800,000

Cost of service 1,280,000
Expenses:
Salaries and Wages Php 280,000
Rental 65,000
Depreciation 55,000
Representation 50,000
Transportation and travel 40,000
Office Supplies 20,000
Miscellaneous 10,000
Other information
Total Assets 5,000,000
Total Liabilities 3,000,000
BIR Form 2307 (EWT) 140,000

Page 8 of 15
Questions:

35. How much is Nicanor’s Income tax payable if he opted Itemized Deduction as his method of deduction?
a. P 196,600 c. P 50,000
b. P 190,000 d. P 56,600

36. How much is Nicanor’s Income tax payable if he opted for 8% income tax rate?
a. P 204,000 c. P 101,600
b. P 746,000 d. 64,000

37. How much is Nicanor’s Income taxable payable if he opted Optional Standard Deduction as his mode of
deduction from gross income?
a. P 394,000 c. P 64,000
b. P 56,500 d. P 254,000

38. Assuming the following taxable year, there will be no changes in the financial information of Nicanor. In order
to save income taxes, what will your advice to Nicanor? Choose the best answer
a. I will advise him to choose graduated income tax (Itemized Deduction) over 8% income tax as he will
save P 7,400
b. I will advise him to choose 8% income tax over graduated income tax (Itemized deduction) as he will save
P 20,600
c. I will advise him to choose graduated income tax (OSD) over 8% income tax as he will save P 218,000
d. I will advise him to choose graduated income tax (OSD) over graduated income tax (Itemized deduction)
as he will save P 197,400

39. Assuming the taxpayer is registered as a One-Person Corporation, how much is the income tax payable upon
filing of the Annual Income Tax Return?
a. P 204,400 c. P 56,600
b. P 196,600 d. P 64,400

Use the following information for the next four (4) items:

Small World Realty Corporation (SWRC), a domestic corporation engaged in real estate business, is classified
as Large Taxpayer by the Bureau of Internal Revenue (Thus, its TIN is registered in the Large Taxpayer Service
in the National Office of the BIR). On January 22, 2022, it sold one of its house and lot located in Taguig to
Nicanor, a wealthy businessman, for P 100,000,000. The zonal value and the fair market value as shown by the
tax declaration of the lot at the time of sale are P 80,000,000 and P 60,000,000 respectively. The fair market
value of the house as per tax declaration at the time of sale is P 60,000,000.

Additional information:
• The deed of sale was executed in Makati
• TIN of Nicanor is registered in Manila

Questions:

40. Based on the foregoing facts, how much withholding taxes will be remitted to the BIR?
a. P 6,000,000 c. P 8,400,000
b. P7,000,000 d. Some other answer.

41. How much documentary stamp tax, if any, will be remitted to the BIR?
a. P 1,500,000 c. P 1,800,000
b. P 2,100,000 d. P 0

Page 9 of 15
42. Based on the foregoing transaction, if you are the accountant of SWRC, what BIR Forms will you file?
a. BIR Form 1706 and BIR Form 2000-OT c. BIR Form 1707 and BIR Form 2000-OT
b. BIR Form 1606 and BIR Form 2000-OT d. BIR Form 1702 and BIR Form 2000-OT

43. In relation to question no. 7, where will you file the said BIR returns?
a. BIR National Office c. BIR Manila
b. BIR Makati d. BIR Taguig

Use the following information for the next five (5) items:

ABC Corporation is a domestic corporation engaged in real estate business. Financial data are shown below:

Financial Position
2021 2022 2023
Assets
Current Assets
Cash and cash 20,000,000 30,000,000 40,000,000
equivalents
Accounts receivable 5,000,000 20,000,000 60,000,000
Land classified as 40,000,000 38,000,000 80,000,000
inventory
Total Current Assets P 65,000,000 P 88,000,000 180,000,000
Non-Current
Office Building 10,000,000 12,000,000 15,000,000
Land (where office is 100,000,000 100,000,000 100,000,000
situated)
Total Non-Current 110,000,000 112,000,000 115,000,000
Assets
Liabilities 55,000,000 67,000,000 80,000,000
Stockholder’s Equity 120,000,000 133,000,000 215,000,000

Statement of Comprehensive Income

2021 2022 2023
Gross sales P 6,000,000 P 20,000,000 P 35,000,000
Cost of sales 2,000,000 10,000,000 20,000,000
Expenses 3,850,000 5,000,000 5,000,000
Net income P150,000 P 5,000,000 P 10,000,000

Questions:

44. The income tax payable of ABC Corporation for the taxable year 2021 is:
a. 80,000
b. 37,500
c. 30,000
d. 40,000

45. The income tax payable of ABC Corporation for the taxable yar 2022 is:
a. 1,250,000
b. 100,000
c. 1,000,000
d. 990,000

Page 10 of 15
46. The income tax payable of ABC Corporation for the taxable year 2023 is:
a. 3,000,000
b. 2,000,000
c. 225,000
d. 2,500,000

47. Assuming in the taxable year 2022, ABC Corporation opted OSD as its mode of deduction instead of Itemized
deduction, how much is its income tax savings, if any?
a. 500,000
b. 300,000
c. 200,000
d. 0

48. Assuming in the taxable year 2023, ABC Corporation opted OSD as its mode of deduction instead of Itemized
deduction. How much is its income tax savings, if any?
a. 450,000
b. 350,000
c. 150,000
d. 250,000

Use the following information for the next seven (7) items:

Nicanor, a sole proprietor, is an owner of a small grocery store in Manila. In 2021, he signified his intention to be
taxed at 8% income tax rate on his 1st Quarterly Percentage Tax return and his 1st Quarterly Income Tax Return.
He came to you and gave the following information about his business.

1st Qtr 2nd Qtr 3rd Qtr Annual

Gross Sales 500,000 800,000 1,500,000 3,600,000
Cost of Goods Sold 200,000 320,000 600,000 1,440,000
Gross Income 300,000 480,000 1,100,000 2,160,000
Business Expenses 60,000 96,000 180,000 432,000
Interest income from BPI-Morayta branch (net of 2,000 4,000 6,000 8,000
final withholding tax)
Dividends Income from ABC Corporation 2,700 5,400 8,100 10,800
(medium sized corporation), Domestic corp (net
of final withholding tax)
BIR Form 2307 (EWT) 500 800 1,500 3,600

Additional Information
• Upon examination of the returns filed by Nicanor, no withholding taxes were withheld and remitted to the BIR
with respect to the rent expense incurred by his business amounting to P 50,000 which is part of the Annual
Business Expenses.
• Part of the Annual Business Expenses of Nicanor is the interest expense he incurred with his loan with BPI-
Morayta amounting to P 30,000 which was deducted in full.

Questions:

49. The Income tax payable for the 1st quarter is:
a. P 20,000 c. P 19,500
b. P 0 d. P 18,500

50. The income tax payable for the 2nd quarter is:
a. P 83,200 c. P 63,200
b. P 82,700 d. P 62,700

Page 11 of 15
51. The income tax payable for the 3rd quarter is:
a. P 204,000 c. P 138,000
b. P 81,700 d. P 118,500

52. The income tax payable for the taxable 2021 is:
a. P 60,400 c. P 200,800
b. P 216,400 d. P 120,400

53. The BIR Form for the Annual Income Tax Return that will be filed with the BIR is:
a. BIR Form 1701 c. BIR Form 1700
b. BIR Form 1701-A d. BIR Form 1702-RT

54. In the reconciliation of Net Income per books against Taxable Income of the Annual Income Tax Return of
Nicanor, how much Income Subjected to Final Tax will you deduct back from the Net income/(Loss) per
Books assuming the Net Income per books is P 1,750,000?
a. P 18,800 c. P 23,500
b. P 22,000 d. P 0

55. In the reconciliation of Net Income per books against Taxable Income of the Annual Income Tax Return of
Nicanor, how much Non-deductible expenses will you add back to the Net income/(Loss) per Books
assuming the Net Income per books is P 1,750,000?
a. P 50,000 c. P 52,000
b. P 80,000 d. P 82,000

56. You were preparing to file the BIR Form 1601-EQ. The professional/consultancy/management fees payable
to different income payees showed the following:
Income payee Amount
Nicanor - a non-VAT registered professional* 100,000
Inday - a non-VAT registered professional** 100,000
Jose - a VAT-registered professional 100,000
XYZ and Co., CPAs – a general professional partnership 100,000
DEF Consultancy Corp. - a consultancy firm*** 100,000
GHI Management Corp. - a management firm**** 100,000
JKL Professionals Corp. – a consultancy firm***** 100,000

Notes:
* Nicanor - With submitted affidavit stating that his gross receipts do not exceed Php 3 Million
**Inday - Without submitted affidavit but whose gross receipts do not exceed Php 3 Million
***DEF - With submitted affidavit stating that their gross receipts do not exceed Php 720,000
****GHI - Without submitted affidavit but whose gross receipts do not exceed Php 720,000
*****JKL - Firm whose gross receipts is Php 10 Million

How much should be the total amount to be withheld on the income payments?
a. P 75,000 c. P 65,000
b. P 85,000 d. P 70,000

57. You were preparing to file the BIR Form 1601-EQ of ABC Corp., a Top Withholding Agent. The various income
payments appeared in the financial records of the Company:
Income payments Amount
Rent – car for use of the president 100,000
Rent – commercial building 100,000
Janitorial fee (20% is agency fee; 80% is salary of 100,000
janitors)
Security fee (20% is agency fee; 80% is salary of 100,000
guards)
Payment to building contractor 100,000

Page 12 of 15
 Purchase of goods – regular suppliers 5,000
Purchase of goods – non-regular suppliers 5,000
Purchase of service – regular suppliers 5,000
Purchase of service – non-regular suppliers 5,000

How much should be the total amount to be withheld on the income payments?
a. P 11,150 c. P 14,550
b. P 9,550 d. P 16,150

Use the following information for the next seven (7) items:

You were preparing the annualization of compensation of all employees of ABC Corp. for the taxable year
2021. The following information were culled from the Company’s records:

Employee Computed Total Annual Tax Withheld from

Taxable Compensation January to
Income November
Nicanor 250,000 10,000
Inday 300,000 5,000
Kennedy (minimum wage earner) 400,000 20,000
Jett 2,000,000 490,000

Other information:
• Emong was hired in November with monthly basic compensation of Php 50,000. Emong submitted his
BIR Form 2316 – Certificate of Compensation Payment / Tax Withheld duly issued by his previous
employer as part of pre-employment requirements. He started working on December 1. The BIR Form
2316 showed as certified by previous employer showed the following information:
Ø Gross Compensation – Php 500,000
Ø Non-Taxable Compensation – Php 50,000
Ø Tax Withheld – Php 20,000
• All employees, except Emong, have no previous employment during the year.

58. Which is TRUE regarding the situation of Nicanor? ABC Corp. should
a. Refund the amount of Php 10,000 not later than January 25, 2022
b. Refund the amount of Php 10,000 not later than December 31, 2021
c. Refund the amount of Php 10,000 not later than January 31, 2022
d. Withhold the amount of Php 10,000 in his December salary and remit the same on or before January 15,
2022

59. In the case of Inday, ABC Corp. should:

a. Withhold the amount of Php 5,000 in December and remit the same on or before January 10, 2022
b. Withhold the amount of Php 5,000 in December and remit the same on or before January 15, 2022
c. Withhold the amount of Php 10,000 in December and remit the same on or before January 15, 2022
d. Refund the excess of Php 5,000

60. In the case of Kennedy, ABC Corp. should:

a. Withhold the amount of Php 10,000 in his December salary
b. Withhold the total amount of Php 30,000 because his compensation exceeded the Php 250,000
threshold
c. Refund him in the amount of Php 20,000
d. Terminate his employment should be file a complaint due to withholding

Page 13 of 15
61. In the case of Jett, ABC Corp. should:
a. Not make any withholding on his December salary
b. Continue to withhold on his December salary using the withholding tax on compensation table
c. Refund him on the excess withholding
d. Carry-over the excess on his tax due in January 2022

62. In the case of Emong, ABC Corp. should:

a. Withhold Php 35,000 on his December salary
b. Withhold Php 6,666.75 on his December salary
c. Not withhold anything since his total salary from the Company is only Php 50,000 which is less than
Php 250,000
d. Not withhold any tax because his income is exempt from taxation

63. How much is the 13th month pay accruing to Emong that is payable by ABC Corp.?
a. Php 4,166.67
b. Php 0
c. Php 41,666.67
d. Discretionary on the part of ABC Corp.

64. Who is qualified for substituted filing assuming proper adjustments were made in December?
a. Jett only
b. Nicanor, Inday, Kennedy and Jett
c. Nicanor, Kennedy and Jett
d. All

Use the following information for the next six (6) items:

An employer furnished the following cash benefits to Nicanor:

• Monetized vacation leave credits (20 days at Php 1,000 per day) – Php 20,000
• Monetized sick leave credits (20 days at Php 1,000 per day) – Php 20,000
• Uniform allowance – Php 10,000
• Christmas cash gift – Php 10,000
• Employee achievement award (loyalty award) – Laptop worth Php 50,000
• Annual medical assistance – Php 10,000
• Daily transportation allowance – Php 100/day (20 working days in a month)
Other information: Total 13th month and other benefits per record – Php 70,000

65. You were preparing the Certificate of Compensation Payment / Tax Withheld (BIR Form 2316) of Nicanor.
How much is the total de minimis benefits that should reflect in Nicanor’s Form 2316 assuming he is a
private employee?
a. Php 41,000
b. Php 81,000
c. Php 43,000
d. Php 45,000

66. In relation to the above, how much is excess de minimis benefits?

a. Php 59,000
b. Php 69,000
c. Php 79,000
d. Php 49,000

Page 14 of 15
67. In relation to the above, how much is additional taxable compensation?
a. Php 61,000
b. Php 59,000
c. Php 51,000
d. Php 49,000

68. Assuming Nicanor is a government employee, how much is the total de minimis benefits that should reflect
in Nicanor’s Form 2316?
a. Php 71,000
b. Php 51,000
c. Php 73,000
d. Php 53,000

69. Under the assumption that Nicanor is a government employee, how much is excess de minimis benefits?
a. Php 49,000
b. Php 59,000
c. Php 39,000
d. Php 69,000

70. Under the assumption that Nicanor is a government employee, how much is additional taxable
compensation?
a. Php 51,000
b. Php 41,000
c. Php 61,000
d. Php 31,000

End of Examination

(Pleases ignore the extra answer options in the answer sheet after number 70)

Thank you for participating in

Team PRTC Nationwide Online Open First Pre-Board Examination for October 2022 LECPA!

Page 15 of 15