POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Junior Philippine Institute of Accountants Manila

E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

Comprehensive Examination
Reviewer

Examination: Taxation and Law

Subject Covered: ACCO 20133: Income Taxation
LAW 20023: Business Law and Regulations

1. SM Partnership is a General Professional Partnership. SM was owned by

Partner A and Partner B. In 2019, the partnership rendered services to client
YG for 1,000,000. How much shall be paid by YG to SM?
a) P1,000,000
b) P500,000
c) P750,000
d) P1,250,000

2. Which of the following is not taxable income?

a) Tax expense previously disallowed as deduction from taxable income, fully
refunded subsequently
b) Income from usurious financing
c) Income from gambling
d) Bad debts previously deducted as item of expense and partially recovered
subsequently

3. Delta Corp. is a domestic corporation. The company’s total assets amounted

to 95 million and its income and expenses are shown below.

Gross income, Philippines 20,000,000

Business expenses, Philippines 25,000,000
Gross income, Hongkong 30,000,000
Business expenses, Hongkong 21,000,000

How much is the income tax due in 2021?

a) P200,000
b) P800,000
c) P5,000,000
d) P0

4. Aespa Corporation, registered under PEZA, and enjoying 5% preferential tax

rate. In 2019, Aespa’s sales totaled 2,000,000 and cost of sale is 500,000.
Operating expenses is 300,000. This was the result of registered activities of
Aespa Corporation in 2019. What is the income tax payable to BIR?
a) P20,000
b) P375,000
c) P75,000
d) P0
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

5. The power of taxation is inherent in sovereignty. This means

a) power of taxation requires legislative grant before a State can exercise it
b) the power of taxation is subject to constitutional and inherent limitations
c) taxation is innate, inborn in very state
d) only Congress can impose taxes

6. AB is indebted to AC. Due to his inability to pay the debt, AB was asked to
clean the poultry of AC for six months. Thereafter, AC gave AB P10,000 and
condoned the debt amounting to P50,000. How much income should be
declared by AB?
a) P10,000
b) P40,000
c) P50,000
d) P60,000

7. Which of the following is not a theory/basis of taxation which explains why a

State can impose tax even in the absence of express constitutional grant?
a) Necessity theory
b) Supremacy theory
c) Benefits-protection theory
d) Lifeblood theory

8. Delta Corp. is a resident foreign corporation. Then, the company’s total assets
amounted to 100 million.

Gross income, Philippines 20,000,000

Business expenses, Philippines 25,000,000
Gross income, Hongkong 30,000,000
Business expenses, Hongkong 21,000,000

How much is the income tax due in 2021?

a) P200,000
b) P800,000
c) P5,000,000
d) P0

9. In which of the following cases shall the monetary value be the entire value
of the benefit?
I. If the employer purchases a residential property and transfers
ownership of the said property in the name of the employee
II. If the employer purchases a residential property and transfers
ownership of the said property to his employee for the latter’s
residential use, at a price less than the employer’s acquisition cost
a) I only
b) Neither I nor II
c) II only
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

d) Both I and II

10. Ally, resident citizen, had the following data for 2019:

Gambling losses of 15,000

Long term capital gain on sale of real property in Philippines of 1,000,000
Compensation income of 200,000
Cash dividend of 12,000
Cash donations received from his friend of 100,000 and cash inheritance
of 200,000

What is the taxable net income of Ally subject to GTR?

a) P1,200,000
b) P200,000
c) P700,000
d) P500,000

11. Statement 1: CREATE repealed the minimum corporate income tax and
improperly accumulated earnings tax.
Statement 2: CREATE repealed the preferential rate applicable to Proprietary
Educational Institutions and Non-Profit Hospitals.
a) False, True
b) True, False
c) True, True
d) False, False

12. Delta Corp. is a nonresident foreign corporation. The company’s total assets
amounted to 95 million.

Gross income, Philippines 20,000,000

Business expenses, Philippines 25,000,000
Gross income, Hongkong 30,000,000
Business expenses, Hongkong 21,000,000

How much is the income tax due in 2021?

a) P200,000
b) P800,000
c) P5,000,000
d) P0

13. Which of the following corporations is subject to income tax?

a) Cemetery company-owned and operated exclusively for the benefit of its members
b) Non-stock and non-profit educational institutions
c) Government educational institutions
d) Non-profit hospitals
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

14. Mr. Dela Cruz, a resident citizen had the following income and expenses:

Gross sales, P5,000,000

Cost of sales, P3,000,000
Business Expenses, P2,000,000
Interests from savings deposit, BPI-Makati, Philippines, P25,000
Prize in a literary contest he joined, P200,000
Prize received for achievement in literature (did not join the contest),
P150,000
Gain from sale of bonds (maturity is 7 years), P60,000
Separation pay from his former job (resigned), P300,000
Cash inherited from his uncle, P1,500,000
Proceeds of his wife’s life insurance (irrevocable beneficiary), P2,000,000
Amount received as return of premium (premium paid, P1,500,000),
P2,000,000
Tax informer’s reward, P500,000
Winnings from illegal gambling, P200,000

How much of the foregoing is not subject to income tax?

a) P3,800,000
b) P2,000,000
c) P5,210,000
d) P4,060,000

15. One of the following is included in the “Gross Philippine Billings” for income
tax purposes of an international air carrier.
a) Tickets sold outside the Philippines for passengers originating from outside the
Philippines
b) Ticket sold in the Philippines for passengers originating from the Philippines but are
not actually flown
c) Passage documents sold in the Philippine for cargoes originating from outside the
Philippines
d) Passage document sold outside the Philippines for excess baggage originating
from the Philippines

16. Creative School University (CSU) is a nonprofit private educational institution

with an issued permit to operate from the Commission on Higher Education.
It is registered with the Securities and Exchange Commission as a private
domestic corporation.

CSU uses a fiscal year accounting ending July 31 of each year. On July 31,
2021, it recorded total gross receipts amounting to 18 million, of which 10
million came from educational related activities while 8,000,000 from other
unrelated business activities. Also, CSU recorded cost of service and operating
expenses from related activities amounting to 2 million and 1,000,000,
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

respectively, and from unrelated business activities amounting to 3 million

and 2 million respectively.

How much is the income tax payable in 2021?

a) P0
b) P1,000
c) P1,000,0000
d) P100,000

17. The following are the revenue items in the Income Statement of a domestic
corporation for the year 2021:

Interest income from bank deposit, Philippines, P40,000

Yield from deposit substitute, Philippines, P80,000
Interest income received from a depositary bank under EFCDS,
Philippines, P60,000
Interest income from bank deposit, USA, P400,000
Interest on trade notes receivable, Philippines, P30,000
Advance rent for 2 years, Philippines, P600,000
Royalties, Philippines, P100,000
Royalties, USA, P300,000
Dividend received from domestic corporation, P150,000
Dividend received from a foreign corporation, P350,000
Prizes and winnings, Philippines, P400,000
Refund of Philippine value-added tax, P100,000

How much is the total final withholding taxes on passive income?

a) P53,000
b) P280,000
c) P113,000
d) P133,000

18. A non-resident citizen arrives in the Philippines on July 31, 2020 to reside
here permanently after many years of living abroad. He had the following data
in 2020:

Gross income, foreign sources, January 1 to July 31, P200,000

Gross income, Philippine sources, August 1 to December 31, P500,000
Gross income, foreign sources, August 1 to December 31, P300,000

How much of his gross income is subject to Philippine Income Tax?

a) P1,000,000
b) P500,000
c) P700,000
d) P800,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

19. Ms. Allyza is employed in JBC Corp. with the following data for the current
year:

Statutory minimum wage (inclusive of the 13th month pay) P175,000

Overtime pay 40,000
Night-shift differential 25,000
Commission from the same employer 20,000

How much is the exempt amount?

a) P240,000
b) P90,000
c) P260,000
d) P0

20. This runs from the date of demand by the Commissioner or any of his
authorized representatives for payment until the actual date of payment.
a) Delinquency Interest
b) Surcharge Interest
c) Deficiency Interest
d) Assessment Interest

21. The Philippines adopted the semi-global tax system, which means that:
a) All incomes subject to final withholding taxes are liable to income tax under the
schedular tax system, while all ordinary income as well as income not subject to
final withholding taxes are liable to income tax under the global tax system;
b) All taxable incomes are subject to final withholding taxes under the schedular tax
system;
c) All taxable incomes, regardless of the nature of income, are added together to arrive
at gross income, and all allowable taxable income;
d) All taxable incomes from sources within and without the Philippines are liable to
income tax

22. Ms. Allyza is employed in JBC Corp. with the following data for the current
year:

Statutory minimum wage (inclusive of the 13th month pay) P175,000

Overtime pay 40,000
Night-shift differential 25,000
Commission from the same employer 20,000

How much is the taxable income?

a) P195,000
b) P20,000
c) P175,000
d) P130,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

23. Ms. Karen received the following benefits.

13th month pay, P50,000

14th month pay, P50,000
Christmas bonus, P25,000
Productivity bonus, P10,000

How much is the total tax-exempt benefits?

a) P75,000
b) P90,000
c) P135,000
d) P125,000

24. Mr. CSO works for GOD, Inc. He is not engaged in business nor has any other
source of income other than his employment. For 2022, Mr. CSO earned total
taxable compensation income of P1,060,000. How much is his income tax
due?
a) P208,000
b) P130,000
c) P78,000
d) P0

25. Income is considered realized for tax purposes when

a) the taxpayer retires from the business without approval from the BIR.
b) the earning process is complete or virtually complete and an exchange has taken
place.
c) the taxpayer has been paid and has received in cash or near cash the taxable
income.
d) it is recognized as revenue under accounting standards even if the law does not
do so.

26. Mr. Gambi, a Taiwanese person residing in Taiwan, was contracted by Smart
Telecom to provide high-speed data across the Philippines. The materials and
other supplies were imported from Taiwan. He started recalibrating the
telecommunications capacity in Taiwan and spent 20 days there. The
installation job was completed in the Philippines for another 10 days. He was
paid P6,000,000 for his job. How much was the income from a Philippine
source?
a) P6,000,000
b) P2,000,000
c) P3,000,000
d) P4,000,000

27. A partnership is a consensual, principal and bilateral & multilateral contract.

It is also the following, except that it is not:
a) a preparatory contract
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

b) a nominate contract
c) an onerous contract
d) an aleatory contract

28. Deok-seon, of Korean origin, went to the Philippines for a short lecture series
wherein she lectured about how to avoid cyber bullying. The lecture series
lasted four weeks. The following details pertain to Deok-seon’s lecture series
in the Philippines:

Professional fees for lecture (P50,000/week) – P200,000

Income from onsite bookselling - P150,000
Travel expenses incurred, with receipts - P100,000
Food and accommodation expenses incurred, with receipts - P120,000

How much is Deok-seon’s Philippine income tax due?

a) P87,500
b) P30,000
c) P0
d) P32,500

29. Which of the following is not an essential requisite of a partnership contract?

a) It must be established for the common benefit of the members which is to earn
profits and divide the profits among the members.
b) The articles are kept secret among the partners
c) There must be a mutual contribution of money, property or industry to a common
fund.
d) It must have a lawful object or purpose.

30. Ms. EBQ operates a convenience store while she offers bookkeeping services
to her clients. In 2022, her gross sales amounted to P800,000, in addition to
her receipts from bookkeeping services of P300,000. She already signified her
intention to be taxed at 8% income tax rate in her 1st quarter return. How
much is the income tax liability for the year?
a) P44,000
b) P4,000
c) P68,000
d) P88,000

31. Ms. EBQ above, failed to signify her intention to be taxed at 8% income tax
rate on gross sales in her 1st quarter income tax return, and she incurred cost
of sales and operating expenses amounting to P600,000 and P200,000,
respectively, or a total of P800,000. How much is the income tax due?
a) P10,000
b) P112,000
c) P92,000
d) P0
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

32. Itzy Corporation, a domestic corporation and a retailer of goods, has gross
sales of P14 million with the cost of sales of P7,600,000 and allowable
deductions of P2,500,000 for the calendar year 2021.

Its total assets of P150 million as of December 31, 2021 per audited financial
statements include the land costing P50 million and the building of P25
million in which the business entity is situated, with an aggregate amount of
P75 million as fixed assets.

How much is the income tax due in 2021?

a) P1,170,000
b) P975,000
c) P780,000
d) P0

33. Sandbox, a domestic corporation, rendering services to its clients, had the
following financial data in the current year 2021:

Gross business income, P850,000

Dividend income from domestic corporations, P31,600
Capital gain from sale of stocks of domestic corporations,
sold directly to buyers, P130,000
Interest income on Philippine currency bank deposit, P4,150
Capital gain from sale of land in Manila City,
(Sales price of P1,650,000), P420,000
Interest income on commercial bonds, P12,900
Sales price on shares of stock of domestic corporation,
held as capital assets, thru a local stock exchange (cost price is P8,600)
P15,200
Business expenses, P721,400

The total final income tax is:

a) P99,000
b) P20,330
c) P0
d) P119,330

34. Masikap Learning Center (MLC), a non-profit, non-stock school, has a gross
income of P2,000,000, only 40% of which was contributed by related
activities and total expenses of P1,000,000, 50% of which was incurred in
connection with non-related activities. MLC has total assets of P101 million.

How much is the income tax due if the income from non-related activities is
not used exclusively for educational purposes?
a) P250,000
b) P175,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

c) P7,000
d) P10,000

35. A house and lot in the Philippines, a capital asset was sold by Silicon Valley, a
domestic corporation, in 2019:

Sales price of property, P2,400,000

Zonal value or fair market value of Property, P1,800,000
Cost price of the property, P1,200,000
Mortgage payable on property assumed by the seller, P150,000
Necessary expenses in the purchase of said house and lot when acquired
by the seller, P15,000

The final capital gains tax is:

a) P72,000
b) P144,000
c) P108,000
d) P36,000

36. The doctrine of delectus personae/personarum refers to the right of a person

to choose:
a) The person whom he wants to be associated with in the partnership.
b) The business in which he wishes to engage with another person or other persons.
c) Both a and b
d) Neither a nor b

37. The financial data of a married resident citizen in the taxable year 2021 are
as follows:

Compensation WHT on Business Business WHT at

Income Wages Income Expenses Source

1st quarter 165,000 9,000 150,000 33,000 500

2nd quarter 142,000 6,000 165,000 45,000 600

3rd quarter 118,000 4,000 120,000 10,000 800

4th quarter 132,000 5,000 182,000 80,000 700

Interest income on bank deposit on bank deposit in Philippines in 1st quarter

is P500
Dividend income from resident foreign corporation in 2nd quarter is P1,800
Dividend income from domestic corporation in 3rd quarter is P1,100
Rental income on business asset in every quarter is P10,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

Excess tax credit in prior year is P2,000

How much is the income tax due for the 1st quarter?
a) P2,500
b) P0
c) P2,000
d) P500

38. The book of accounts of San Juan Corporation showed the following data:

Fringe benefits tax expense of 53,846.155

Fringe benefit expense of 300,000

What is the monetary value of fringe benefits given to rank and file
employees?
a) P300,000
b) P200,000
c) P100,000
d) P0

39. The financial data of a married resident citizen in the taxable year 2021 are
as follows:

Compensation WHT on Business Business WHT at

Income Wages Income Expenses Source

1st quarter 165,000 9,000 150,000 33,000 500

2nd quarter 142,000 6,000 165,000 45,000 600

3rd quarter 118,000 4,000 120,000 10,000 800

4th quarter 132,000 5,000 182,000 80,000 700

Interest income on bank deposit on bank deposit in Philippines in 1st quarter

is P500
Dividend income from resident foreign corporation in 2nd quarter is P1,800
Dividend income from domestic corporation in 3rd quarter is P1,100
Rental income on business asset in every quarter is P10,000
Excess tax credit in prior year is P2,000

How much is the taxable net income for the 2nd quarter?
a) P258,800
b) P130,000
c) P175,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

d) P0

40. A voluntary association or society whose articles are kept secret among its
members and where any one of the members may transact in his own name
possesses which of the following characteristics?
a) It is governed by the rules on co-ownership.
b) It has a juridical personality.
c) The members are treated as partners.
d) It shall be governed by the provisions on partnership.

41. The financial data of a married resident citizen in the taxable year 2021 are
as follows:

Compensation WHT on Business Business WHT at

Income Wages Income Expenses Source

1st quarter 165,000 9,000 150,000 33,000 500

2nd quarter 142,000 6,000 165,000 45,000 600

3rd quarter 118,000 4,000 120,000 10,000 800

4th quarter 132,000 5,000 182,000 80,000 700

Interest income on bank deposit on bank deposit in Philippines in 1st quarter

is P500
Dividend income from resident foreign corporation in 2nd quarter is P1,800
Dividend income from domestic corporation in 3rd quarter is P1,100
Rental income on business asset in every quarter is P10,000
Excess tax credit in prior year is P2,000

How much is the income tax still due after-tax credit for the 3rd quarter?
a) P25,760
b) P23,760
c) P23,860
d) P21,860

42. The financial data of a married resident citizen in the taxable year 2021 are
as follows:
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

Compensation WHT on Business Business WHT at

Income Wages Income Expenses Source

1st quarter 165,000 9,000 150,000 33,000 500

2nd quarter 142,000 6,000 165,000 45,000 600

3rd quarter 118,000 4,000 120,000 10,000 800

4th quarter 132,000 5,000 182,000 80,000 700

Interest income on bank deposit on bank deposit in Philippines in 1st quarter

is P500
Dividend income from resident foreign corporation in 2nd quarter is P1,800
Dividend income from domestic corporation in 3rd quarter is P1,100
Rental income on business asset in every quarter is P10,000
Excess tax credit in prior year is P2,000

How much is the annual taxable net income?

a) P378,800
b) P1,047,800
c) P669,000
d) P0

43. Where an immovable property or real rights are contributed to a partnership,

the partnership contract must be in a public instrument to which shall be
attached an inventory of the immovable property contributed and signed by
the parties. Failure to comply with the said requirements:
a) Makes the partnership void.
b) Makes the partnership unenforceable.
c) Makes the partnership voidable.
d) Does not affect the acquisition by the partnership of a juridical personality.

44. An offshore banking unit had the following offshore banking transactions
within the Philippines during the taxable quarter ending September 30, 2021:

Income
With local commercial banks - P3,850,000
With domestic corporations - P3,400,000
With other offshore banking units - P4,700,000

If the offshore banking unit can claim allowable deduction of P2,830,000, how
much is the offshore banking unit’s income tax due?
a) P2,987,500
b) P1,105,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

c) P1,812,500
d) P2,280,000

45. If the capital of the partnership is P3,000 or more, in money or property, the
partnership must be in public instrument which must be recorded in the office
of the Securities and Exchange Commission. Failure to comply with such
requirements:
a) Makes the partnership void.
b) Makes the partnership unenforceable.
c) Makes the partnership voidable.
d) Does not affect the acquisition by the partnership of a juridical personality.

46. A Resident citizen husband and wife with two dependent children are going
to file their 2020 income tax returns with the following details:

Salary and allowances of husband arising from employment:

Salary of PHP 652,000,
Living allowances of PHP 100,000, and
Housing benefits (100%) of PHP 300,000
Teaching salary of wife, PHP 68,000
Wife inherited land costing 200,000
Gross dividend income from investment in shares of stock of a domestic
corporation of PHP 10,000
Interest of PHP 20,000 on peso bank account
Capital gain on sale of shares of PHP 5,000
Taxes withheld by employer of husband at PHP 118,000 and by employer
of wife at nil.

Husband is occupying a managerial position in the company.

How much is the basic income tax due from the husband?
a) P188,000
b) P118,000
c) P93,000
d) P0

47. The following are disqualified to form a universal partnership, except:

a) Husband and wife.
b) Man and woman living together as husband and wife without the benefit of
marriage.
c) Brother and sister.
d) Those guilty of adultery or concubinage.

48. G-idle Corp. had a taxable net income of P5,500,000 and total assets of P100
million. It had the following data on expenses for the taxable year.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

Salary expense, P12,000,000

Rent expense, P2,400,000
Advertising expense, P600,000
Depreciation expense, P500,000
Interest expense, P6,000,000
Interest income, net of 20% final tax, P2,400,000

How much is the regular itemized deductions?

a) P20,400,000
b) P19,800,000
c) P20,900,000
d) P20,300,000

49. The financial data of a married resident citizen in the taxable year 2021 are
as follows:

Compensation WHT on Business Business WHT at

Income Wages Income Expenses Source

1st quarter 165,000 9,000 150,000 33,000 500

2nd quarter 142,000 6,000 165,000 45,000 600

3rd quarter 118,000 4,000 120,000 10,000 800

4th quarter 132,000 5,000 182,000 80,000 700

Interest income on bank deposit on bank deposit in Philippines in 1st quarter

is P500
Dividend income from resident foreign corporation in 2nd quarter is P1,800
Dividend income from domestic corporation in 3rd quarter is P1,100
Rental income on business asset in every quarter is P10,000
Excess tax credit in prior year is P2,000

How much is the income tax still due after-tax credit for the year?
a) P204,340
b) P153,880
c) P159,080
d) P21,860

50. A owes R P4,000 which is interest bearing. He also owes P6,000 to QRS
Company, a partnership of which R is the partner authorized to collect the
credits of the partnership, which debt is due is non-interest bearing. Both
debts are due. A gives R P4,000 informing R that the amount is in payment of
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

his debt to the latter. Accordingly, R issues his own receipt. To which credit
will the payment be applied?
a) To the credit of R.
b) To the credit of QRS Company.
c) To the credit of R and that of QRS Company proportionately at P1,600 and P2,400
respectively.
d) To the credit of R and that of QRS Company equally at P2,000 each.

51. A owes R P4,000 which is due on March 15. He also owes P6,000 to QRS
Company, a partnership of which R is the partner authorized to collect the
credits of the partnership, which debt is due on March 30. On March 20, A
gives R P4,000 informing R that the amount is in payment of his debt to the
latter. Accordingly, R issues his own receipt. To which credit will payment be
applied?
a) To the credit of R.
b) To the credit of QRS Company.
c) To the credit of R and that of QRS Company proportionately at P1,600 and P2,400
respectively.
d) To the credit of R and that of QRS Company equally at P2,000 each.

52. Amazona Corporation is a resident foreign corporation with branches

nationwide, including the Philippines. Its Philippine branch had an income of
P15,000,000 in 2020 and it earmarked P7,500,000 for remittance. It actually
remitted P7,000,000. How much is the branch profit remittance tax due of the
Philippine branch?
a) P2,250,000
b) P1,050,000
c) P1,125,000
d) P0

53. Under this doctrine, the separate personality of a corporation may be

disregarded if it is used for fraudulent or illegal purposes or to escape faithful
compliance of an obligation.
a) Trust Fund Doctrine
b) Doctrine of piercing the veil of corporate entity
c) Doctrine of corporate opportunity
d) Doctrine of limited capacity

54. A Resident citizen husband and wife with two dependent children are going
to file their 2020 income tax returns with the following details:

Salary and allowances of husband arising from employment:

Salary of PHP 652,000,
Living allowances of PHP 100,000, and
Housing benefits (100%) of PHP 300,000
Teaching salary of wife: PHP 68,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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Wife inherited land costing 200,000

Gross dividend income from investment in shares of stock of a domestic
corporation of PHP 10,000
Interest of PHP 20,000 on peso bank account
Capital gain on sale of shares of PHP 5,000
Taxes withheld by employer of husband at PHP 118,000 and by employer
of wife at nil.

Husband is occupying a managerial position in the company.

How much is the net income of the wife subject to basic income tax?
a) P188,000
b) P118,000
c) P93,000
d) P0

55. Under this theory, the nationality of a corporation is that of the country under
whose laws it was formed.
a) Incorporation Test
b) Control Test
c) Domiciliary Test
d) Grandfather Rule

56. In 2019, a non-stock and non-profit organization provided a 3-day trip in

Batangas to its President. Total expenses incurred by the organization in the
3-day trip were 70,000. What are the total expenses of the organization?
a) P70,000
b) P35,000
c) P0
d) Cannot be determined

57. In the province, a farmer couple borrowed money from the local merchant. To
guarantee payment, they left the Torrens Title of their land with the
merchant, for him to hold until they pay the loan. Is there a:
a) Contract of pledge
b) Contract of mortgage
c) Contract of antichresis
d) None of the above

58. It is the right of a guarantor to be free from execution of his own

properties until the creditor shall have first exhausted all the properties of
the principal debtor.
a) Benefit of Excussion
b) Benefit of Division
c) Fringe Benefit
d) Benefit of a Guarantor
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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59. The following tax expenses related to business were paid by Kpop Trading in
2021:

Business taxes, other than VAT, P20,000

Documentary stamp taxes, P1,000
Automobile registration fees, P3,000
Import duty taxes, P50,000
Postage stamp taxes, P500
Stock transaction tax, P2,500
Income tax, P600,000
Value-added tax, P240,000
Donor’s tax, P8,000

How much is the amount of taxes deductible from gross income?

a) P74,500
b) P317,000
c) P925,000
d) P0

60. One of the parties delivers to another, either something not consumable so
that the latter may use the same for a certain time and return it.
a) Mutuum
b) Commodatum
c) Barter
d) Dacion en pago

61. Kepler Corporation, a domestic corporation had the following record of

income and expenses during the year:

Gross income, P1,560,000

Expenses, P453,000
Dividends from a resident foreign corporation (3-year gross income within
is less than 50% of its total gross income), P95,000
Royalties, Philippines, P230,000
Royalties, South Korea, P175,000
Interest on time deposit with Metrobank, P18,000
Interest on money market placement, P25,000

How much is Kepler Corporation's taxable income?

a) P1,107,000
b) P1,282,000
c) P1,202,000
d) P1,377,000

62. A, B and C obtained a loan from Donnabel in the amount of P120,000. To

secure the debt, A pledged his cellphone, B his laptop computer and C his
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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wristwatch. A then paid his share amounting to P40,000. Which of the choices
are correct statements?
I. A, B, & C are jointly and severally liable to Donnabel.
II. The obligations of A, B & C are joint.
III. A may demand the return of the cell phone after paying his share of
the debt
a) I & II are true
b) II & III are true
c) I & III are false
d) II & III are false

63. X was hired by JYP Company as an independent contractor, whereby JYP has
no power to control X's conduct and was paid based on the contract price. X
earned 400,000 from JYP for his services rendered in 2019. X incurred 20,000
only in relation to the rendition of services to JYP. In 2019, what is the income
tax due of X under 8% optional tax rate?
a) P30,400
b) P12,000
c) P32,000
d) P0

64. B pledged his Rolex watch to C for P4,000. B failed to pay C the P4,000 on due
date, C sold the Rolex watch at a public auction to the highest bidder at
P3,500.
a) C can recover the deficiency of P500 from B.
b) C can recover the deficiency of P500 even without stipulation.
c) C cannot recover the deficiency of P500 unless there is stipulation.
d) C cannot recover the deficiency of P500 even if there is stipulation.

65. In a corporation, two or more positions may be held concurrently by the same
person, except that no one person shall act as:
a) President and Chairman of the Board
b) Secretary and Treasurer
c) Treasurer and Director
d) President and Secretary

66. Ms. Kyla, a Filipino, is currently working in South Korea as OFW. She earns a
total compensation income of P5,400,000 per year. While in South Korea, she
entered into the following contract of sale:

(1) Sale of shares of stocks in BPI, a publicly-listed domestic corporation,

for P1,200,000. The cost of the shares is P200,000.
(2) Sale of his house and lot located in Manila to his Filipino friend who also
works in South Korea for P3,300,000. She acquired the house and lot
for P1,000,000.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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(3) Sale of his car for P900,000. He bought the car from the Philippines for
P800,000 two years ago and exported the same to South Korea for
personal use.

How much is the actual gain derived from sources within the Philippines?
a) P1,000,000
b) P2,300,000
c) P3,300,000
d) P5,600,000

67. How many numbers of votes of the Board of Directors are required to change
the name of the corporation?
a) 2/3 vote of all the members of the Board
b) 2/3 vote of all present.
c) Majority vote of all present constituting a quorum
d) Majority vote of the Board

68. The following, except one, are qualifications of corporate directors:

a) Must continuously own at least one share during their term as directors.
b) Must own at least one share of stock.
c) Ownership of shares must be recorded in the books of the corporation.
d) Majority are citizens of the Philippines.

69. Which of the following statements concerning the implications of being an

artificial being of a corporation is correct?
a) As a general rule, a corporation is not entitled to moral damages because, not being
a natural person, it cannot experience physical suffering or sentiments like wounded
feelings, serious anxiety, mental anguish and moral shock except when a
corporation has a reputation that is debased, resulting in its humiliation in the
business realm particularly in the case of libel or defamation.
b) As a general rule, a corporation cannot be held liable for a crime because of the
impossibility of imposing the penal sanction of imprisonment and because a crime
committed in the name of corporation is actually committed by the individuals who
act for and on behalf of such corporation. However, it may become liable for fines
to be imposed in the criminal action.
c) Both A and B.
d) Neither A nor B.

70. Juan, Senior citizen, is engaged in business of selling product Y. For 2017,
Lolo Juan has total sales of 300,000 and cost of sales/expenses of 100,000.
He has also paid family expenses such as foods and utilities of 40,000. What
is the taxable net income of Juan?
a) P200,000
b) P150,000
c) P300,000
d) P125,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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Summary of Answers

1. A 36. A
2. A 37. B
3. B 38. B
4. C 39. A
5. C 40. A
6. D 41. D
7. B 42. B
8. A 43. A
9. D 44. D
10. C 45. D
11. D 46. D
12. C 47. C
13. D 48. B
14. C 49. B
15. D 50. C
16. D 51. A
17. A 52. B
18. D 53. B
19. A 54. D
20. A 55. A
21. A 56. A
22. B 57. D
23. B 58. D
24. A 59. A
25. B 60. B
26. B 61. D
27. D 62. B
28. A 63. B
29. B 64. D
30. C 65. D
31. A 66. C
32. C 67. D
33. D 68. D
34. A 69. C
35. B 70. B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

Summary of Answers – Explained

1. (A) P1,000,000
Amount to be paid 1,000,000

2. (A)
3. (B)
Gross income, Philippines 20,000,000
Gross income, Hongkong 30,000,000
Business expenses, Philippines 25,000,000
Business expenses, Hongkong 21,000,000
Taxable income 4,000,000
RCIT rate 20%
RCIT / Basic Tax 800,000

Gross income, PH & Hongkong 50,000,000

MCIT rate 1%
MCIT 500,000

Income Tax Due (Higher) 800,000

4. (C)
Gross Sales 2,000,000
Less: Cost of Sale (500,000)
Gross Income 1,500,000
Multiply: Preferential tax Rate 5%
Income Tax Payable 75,000

5. (C)
6. (D)
Condonation of the debt 50,000
Additional Income 10,000
Total Income to be declared 60,000

Condonation of indebtedness in consideration of service performed to or for the creditor

is recognized as income.

7. (B)
8. (A)
Gross income, Philippines 20,000,000
Business expenses, Philippines (25,000,000)
Taxable income (5,000,000)
RCIT rate 25%
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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RCIT / Basic Tax -

Gross income, Philippines 20,000,000

MCIT rate 1%
MCIT 200,000

Income Tax Due (Higher) 200,000

9. (D)
10. (C)
Long term capital gain on sale of real property in Philippines 1,000,000
Multiply: Holding Period Rate 50%
Income subject to basic tax 500,000
Add: Compensation Income 200,000
Taxable Net Income 700,000

Losses from wagering (gambling) are deductible only to the extent of gains from such
transactions. A wager is made when the outcome depends upon chance.

Long-term capital gains means a capital gain with a holding period of more than 12
months, hence, only 50% of the gain is recognized and subject to basic income tax.

11. (D)
MINIMUM CORPORATE INCOME TAX
CREATE reduced the 2% minimum corporate income tax imposed on domestic and
resident foreign corporations to 1% of gross income effective July 1, 2020 until June 30,
2023.

IMPROPERLY ACCUMULATED EARNINGS TAX

CREATE repealed the imposition of improperly accumulated earnings tax under Section 29
of the National Internal Revenue Code (NIRC).

REGULAR CORPORATE INCOME TAX

Proprietary educational institutions and hospitals, except those whose gross income from
unrelated trade, business or other activity exceeds 50% of the total gross income derived
from all sources, shall pay a tax of 10% on their taxable income.

12. (C)
Gross income, Philippines 20,000,000
MCIT rate 25%
Income Tax Due 5,000,000

*MCIT is not applicable to nonresident foreign corporation

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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13. (D)
According to the Revenue Memorandum Order (RMO) No. 38-2019 containing the new
guidelines for the processing and issuance of Certificates of Exemption (CTE) which
provides parameters on which entities fall within the ambit of the so-called “Section 30
corporations,” i.e., tax-exempt corporations, in which they include (1) labor, agriculture
or horticultural organizations not organized principally for profit; (2) mutual savings banks
not having capital stock represented by shares, and cooperative banks without capital
stock organized and operated for mutual purposes and without profit; (3) beneficiary
society orders or associations, operating for the exclusive benefit of the members; (4)
cemetery company, owned and operated exclusively for the benefit of its
members; (5) non-stock corporations or associations operated exclusively for religious,
charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans;
(6) business leagues, chambers of commerce, boards of trade not organized for profit;
(7) civic leagues or those organized exclusively for the promotion of social welfare; (8)
non-stock and nonprofit educational institutions; (9) government educational
institutions; (10) farmers’ or other mutual typhoon or fire insurance companies, mutual
ditch or irrigation companies, mutual or cooperative telephone companies, or like
organizations of a purely local character; (11) as well as farmers’, fruit growers’
associations operated as a sales agent for the purpose of marketing the products of its
members.

14. (C)
Prize received for achievement in literature (did not join the contest) 150,000
Gain from sale of bonds (maturity is 7 years) 60,000
Cash inherited from his uncle 1,500,000
Proceeds of his wife’s life insurance (irrevocable beneficiary) 2,000,000
Amount received as return of premium (premium paid, P1,500,000) 1,500,000
Items not subject to income tax 5,210,000

15. (D)
16. (D)
Gross receipts 18,000,000
Cost of Service
Related activities 2,000,000
Unrelated Activities 3,000,000 (5,000,000)
Operating Expenses
Related activities 1,000,000
Unrelated activities 2,000,000 3,000,000
Taxable income 10,000,000
Tax rate 1%
Income tax payable 100,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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17. (A)
Taxable
Passive Income Tax Rate Final Tax
Amount
Interest income from bank
deposit, Philippines 40,000 20% 8,000
Yield from deposit substitute,
Philippines 80,000 20% 16,000
Interest income received from a
depositary bank under EFCDS,
Philippines 60,000 15% 9,000
100,000 20% 20,000
Royalties, Philippines
Total 280,000 53,000

Prize and winning of a corporation is subject to basic income tax.

18. (D)
Gross income, Philippine sources, August 1 to December 31 500,000
Gross income, foreign sources, August 1 to December 31 300,000
Gross Income subject to Philippine Income Tax 800,000

A citizen that was previously a non-resident citizen and arrives at the Philippines at any
time during the taxable year to reside permanently in the Philippines, he will be
considered as non-resident citizen in respect to his income derived outside the
Philippines until the time he arrives.

19. (A)
Statutory minimum wage (inclusive of the 13th month pay) 175,000
Overtime pay 40,000
Night-shift differential 25,000
Total exempt amount 240,000

20. (A)
21. (A)
22. (B)
Commission from the same employer 20,000
Taxable Income 20,000

Commission from the same employer is not included in the exempt amount since it is
subject to basic income tax.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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23. (B)
Threshold Amount 90,000

Taxable bonuses include thirteenth month pay and other benefits exceeding the
threshold of P90,000. Bonuses are not taxable if the total amount received is P90,000
[RA 10963] or less.

24. (A)
First 800,000 income 130,000
In excess of 800,000 income
(1,060,000 - 800,000) x 30% 78,000
Income Tax Due 208,000

25. (B)
26. (B)
Total Compensation 6,000,000
Multiply: Pro-rated days he spent in the Philippines 1/3
Total Income from a Philippine source 2,000,000

27. (D)
28. (A)
Professional fees for lecture 200,000
Income from onsite bookselling 150,000
Total 350,000
Final Tax rate of NRANETB 25%
Income Tax Due 87,500

29. (B)
The essential requisites of partnership includes: a) there must be a valid contract; b) there
must be a mutual contribution of money, property or industry to a common fund; c) there
must have a lawful object or purpose; and d) must established for the common benefit of
the partners which is to obtain profits and to divide the profits among themselves.
Therefore, keeping the articles secret among the members is not an essential requisite of
a partnership contract.

30. (C)
800,000 + 300,000 = 1,100,000
(1,100,000 - 250,000) x 8% = 68,000

*The 250,000 deduction is only allowed for Purely SEP individuals.

31. (A)
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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Gross sales/receipts 1,100,000

Cost of sales (600,000)
Operating Expenses (200,000)
Net Income 300,000

Tax on:
First 250,000 income -
In excess of 250,000 income
(300,000 - 250,0000) x 20% 10,000
Income Tax Due 10,000

32. (C)
Gross Sales 14,000,000
Less: Cost of Sales (7,600,000)
Allowable Deductions (2,500,000)
Taxable Net Income 3,900,000
Multiply: Tax Rate 20%
Income Tax Due 780,000

33. (D)
Taxable
Passive Income Tax Rate Final Tax
Amount
Capital gain from sale of stocks of
domestic corporations, sold directly to 130,000 15% 19,500
buyers
Interest income on Philippine currency
4,150 20% 830
bank deposit
Capital gain from sale of land in Manila
1,650,000 6% 99,000
City, (Sales price of P1,650,000)
Total 1,784,150 119,330

34. (A)
Unrelated Unrelated
Total
Activities Activities
Gross Income *
800,000 **
1,200,000 2,000,000
Less: Total Expense ***
(500,000) ***
(500,000) (1,000,000)
Net Income 300,000 700,000 1,000,000

Taxable Income 1,000,000

Multiply: Tax Rate 25%
Income Tax Due 250,000
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Unrelated activities of a non-profit, non-stock educational institution are subject to

regular basic income tax.
*2,000,000 x 40%
**2,000,000 x 60%
***1,000,000 x 50%

35. (B)
Sales price of the property 2,400,000
Multiply: CGT Rate 6%
Capital Gain Tax Due 144,000

36. (A)
37. (B)
Q1 Q2 Q3 Q4
Business Income 150,000 165,000 120,000 182,000
Rental Income 10,000 10,000 10,000 10,000
Business Expenses (33,000) (45,000) (10,000) (80,000)
Taxable income - last quarter 127,000 258,800 378,800
Compensation income 557,000
Dividend income from RFC 1,800
Taxable Income 127,000 258,800 378,800 1,047,800

Income tax due - 1,760 25,760 204,340

Less:
Prior year’s excess credit (2,000) (2,000) (2,000) (2,000)
WHT at source (500) (1,100) (1,900) (2,600)
WHT on wages (24,000)
Tax paid - last quarter (21,860)
Income tax payable (2,500) (1,340) 21,860 153,880

38. (B)
Supervisory Rank/File Total
Fringe Benefit Tax Expense 53,846.155
Multiply: FBT Rate 35%
Grossed-Up Monetary Value 153,846.155
Multiply: GUMV Rate 65%
Monetary Value 100,000 200,000 300,000

39. (A)
Q1 Q2 Q3 Q4
Business Income 150,000 165,000 120,000 182,000
Rental Income 10,000 10,000 10,000 10,000
Business Expenses (33,000) (45,000) (10,000) (80,000)
Taxable income - last quarter 127,000 258,800 378,800
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Compensation income 557,000

Dividend income from RFC 1,800
Taxable Income 127,000 258,800 378,800 1,047,800

Income tax due - 1,760 25,760 204,340

Less:
Prior year’s excess credit (2,000) (2,000) (2,000) (2,000)
WHT at source (500) (1,100) (1,900) (2,600)
WHT on wages (24,000)
Tax paid - last quarter (21,860)
Income tax payable (2,500) (1,340) 21,860 153,880

40. (A)
41. (D)
Q1 Q2 Q3 Q4
Business Income 150,000 165,000 120,000 182,000
Rental Income 10,000 10,000 10,000 10,000
Business Expenses (33,000) (45,000) (10,000) (80,000)
Taxable income - last quarter 127,000 258,800 378,800
Compensation income 557,000
Dividend income from RFC 1,800
Taxable Income 127,000 258,800 378,800 1,047,800

Income tax due - 1,760 25,760 204,340

Less:
Prior year’s excess credit (2,000) (2,000) (2,000) (2,000)
WHT at source (500) (1,100) (1,900) (2,600)
WHT on wages (24,000)
Tax paid - last quarter (21,860)
Income tax payable (2,500) (1,340) 21,860 153,880

42. (B)
Q1 Q2 Q3 Q4
Business Income 150,000 165,000 120,000 182,000
Rental Income 10,000 10,000 10,000 10,000
Business Expenses (33,000) (45,000) (10,000) (80,000)
Taxable income - last quarter 127,000 258,800 378,800
Compensation income 557,000
Dividend income from RFC 1,800
Taxable Income 127,000 258,800 378,800 1,047,800

Income tax due - 1,760 25,760 204,340

Less:
Prior year’s excess credit (2,000) (2,000) (2,000) (2,000)
WHT at source (500) (1,100) (1,900) (2,600)
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WHT on wages (24,000)

Tax paid - last quarter (21,860)
Income tax payable (2,500) (1,340) 21,860 153,880

43. (A)
44. (D)
With local commercial banks 3,850,000
With domestic corporations 3,400,000
With other offshore banking units 4,700,000
Gross Income 11,950,000
Less: Allowable Deductions (2,830,000)
Taxable Net Income 9,120,000
Multiply: Tax Rate 25%
Income Tax Due 2,280,000

OBUS shall now be taxed as resident foreign corporation upon the effectivity of the
CREATE

45. (D)
46. (D)
Salary 652,000
Living Allowance 100,000
Total Taxable Income 752,000

Income Tax Due

First 400,000 30,000
Remaining 352,000 at 25% 88,000 118,000
Less: Tax Withheld (118,000)
Basic Income Tax Payable -

Housing benefits received by a managerial/supervisory are income-tax exempt.

47. (C)
48. (B)
Salary expense 12,000,000
Rent expense 2,400,000
Advertising Expense 600,000
Depreciation Expense 500,000
Interest expense 6,000,000
Less: Interest income, net of 20% final tax (600,000)
Total Regular Itemized Deduction 20,900,000
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49. (B)
Q1 Q2 Q3 Q4
Business Income 150,000 165,000 120,000 182,000
Rental Income 10,000 10,000 10,000 10,000
Business Expenses (33,000) (45,000) (10,000) (80,000)
Taxable income - last quarter 127,000 258,800 378,800
Compensation income 557,000
Dividend income from RFC 1,800
Taxable Income 127,000 258,800 378,800 1,047,800

Income tax due - 1,760 25,760 204,340

Less:
Prior year’s excess credit (2,000) (2,000) (2,000) (2,000)
WHT at source (500) (1,100) (1,900) (2,600)
WHT on wages (24,000)
Tax paid - last quarter (21,860)
Income tax payable (2,500) (1,340) 21,860 153,880

50. (C)
The rule on application of payment is applicable only in case there is a concurrence of
debt by one debtor in favor of one creditor. In the instant case, although there is only 1
debtor, there are two creditors involved. As such, C is the correct answer. The credit
should be applied proportionately.

51. (A)
The payment of A on March 20 is applied to R’s credit because the credit of R is already
due on March 15 which is prior to the payment is made. On the other hand, the partnership
credit will be due only on March 30. So, the partnership credit cannot yet be demanded
from A even if R is the partner authorized to collect the credit of the partnership. The
Rule in Article 1792 is applicable only if both debts are due and demandable.

Even if the credit in favor of the partnership is not yet due and demandable, the debtor
can still apply the payment in favor of the partnership. In that case, the debtor-partner
cannot ask for proportionate share. But if the debtor applied the payment solely on the
credit in favor of the partner-debtor and the debt in favor of the partnership is not yet
due and demandable, then the partnership is NOT entitled to a proportionate share of the
payment.

52. (C)
Income earmarked for remittance 7,500,000
Multiply: BPR Tax Rate 15%
Branch Profit Remittance Tax Due 1,125,000
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

Resident foreign corporations shall pay Branch Profits Remittance Tax of 15% on the total
profits applied or earmarked for remittance without any deduction for the tax component
(except those activities registered with PEZA).

53. (B)
54. (D)
Teaching Salary 68,000
Total Taxable Income 68,000
Income Tax Due -

55. (A)
56. (A)
Total Expense 70,000

57. (D)
In this case, there is no pledge. Under 2094 of the NCC, all movables, which are within
commerce, may be pledged, provided they are susceptible of possession. If at all, there
was a pledge of the paper or document constituting the Torrens Title, as a movable by
itself, but not of the land, which the title represents.

There is no mortgage because no deed or contract was executed in the manner required
by law for a mortgage (Arts. 2085 to 2092, NCC; 2124 to 2131, NCC). Specifically, under
Article 2125, the law provides that it is indispensable, in order that a mortgage may be
validly constituted, that the document in which it appears be recorded in the Registry of
Property. If the instrument is not recorded, the mortgage is nevertheless binding between
the parties.

There is no contract of antichresis because no right to the fruits of the property was given
to the creditor (Art. 2132 NCC). In this case, the farmer couple simply left the Torrens
Title of their land for the latter to hold.

A contract of simple loan was entered into with security arrangement agreed upon by the
parties, which is not one of those mentioned above.

58. (D)
59. (A)
Business taxes, other than VAT 20,000
Documentary stamp taxes 1,000
Automobile registration fees 3,000
Import duty taxes 50,000
Postage stamp taxes 500
Taxes deductible from gross income 74,500
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

60. (B)
61. (D)
Gross Income 1,560,000
Less: Expense (453,000)
Net Income 1,107,000
Dividends from a resident foreign corporation (3-year gross income
95,000
within is less than 50% of its total gross income)
Royalties, USA 175,000
Total Taxable Income 1,377,000

62. (B)
63. (B)
Income earned 400,000
Less: Exemption (250,000)
Taxable Income 150,000
Multiply: Optional Tax Rate 8%
Income Tax Due 12,000

64. (D)
65. (D)
66. (C)
Sale of shares of stocks in BPI, a publicly-listed domestic corporation
Selling Price 1,200,000
Less: Cost of Shares (200,000) 1,000,000

Sale of his house and lot located in Manila to his Filipino friend who also works in
Argentina
Selling Price 3,300,000
Less: Cost of House and Lot (1,000,000) 2,300,000

Actual Gain from Philippines 3,300,000

67. (D)
According to section 15 of R.A. 11232, the amendment of Articles of Incorporation, unless
otherwise prescribed by this Code or by special law, and for legitimate purposes, any
provision or matter stated in the articles of incorporation may be amended by a majority
vote of the board of directors or trustees and the vote or written assent of the
stockholders representing at least two-thirds (2/3) of the outstanding capital stock,
without prejudice to the appraisal right of dissenting stockholders in accordance with the
provisions of this Code. The articles of incorporation of a nonstock corporation may be
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Junior Philippine Institute of Accountants Manila
E500, 5/F Main Bldg., A. Mabini Campus, Anonas St., Sta. Mesa, Manila

amended by the vote or written assent of majority of the trustees and at least two-thirds
(2/3) of the members.

68. (D)
69. (C)
70. (B)
Total Sales 300,000
Less: Cost of Sales/Expense (100,000)
Net Income 200,000
Less: Personal Exemption (50,000)
Taxable Net Income 150,000