HIGHER ACADEMIA INC.

Department of Accountancy

BS ACCOUNTANCY 4 PRELIM EXAM: QUESTIONNAIRE

INTEGRATED REVIEW IN TAXATION 2nd Semester, AY 2024-2025

NAME: ___________________________ SECTION: _______ DATE: _______ SCORE: ______

General Instructions:
 All erasures are wrong.
 Cheating is prohibited.

MULTIPLE CHOICE: Analyze the following questions and choose the best answer. Write the letter of your
answer on the answer sheet provided. (2pts. Each/ Total: 70 pts.)
1. What is the theory of taxation?
A. Necessity
B. Constitutionality
C. Reciprocal duties of support and protection
D. Public purpose
2. Requiring non-resident aliens residing outside the country to file tax returns here in the Philippines
would more likely result in
A. Violation of constitutional limitation
B. Violation of inherent limitation
C. Violation of both inherent and constitutional limitations
D. No violation
3. To save taxes, the buyer and the seller agreed to stipulate a lower amount of selling price in the
notarized deed of sale. This is an example of
A. Tax minimization
B. Tax evasion
C. Tax loophole
D. Tax arbitrage
4. The power to interpret provision of the NIRC is under the exclusive and original jurisdiction of the CIR
subject to review by
A. Secretary of Justice
B. Secretary of Finance
C. Senate President
D. President of the Philippines
5. Which is not a basis of compromise?
A. A reasonable doubt as to the validity of the claim against the taxpayer exists
B. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax
C. The tax or any portion thereof appears to be unjustly or excessively assessed
D. None of these
6. S1: Real property tax is a national tax.
S2: Value-added tax is a progressive tax.
S3: Estate tax is a direct tax.
A. Only S1 is True
B. Only S2 is True
C. Only S3 is True
D. All are False
7. S1: Non-payment of tax does not necessarily render the business illegal.
S2: License fee is imposed as a regulatory measure.
S3: Tax has generally no limit on the amount that it may be imposed.
S4: License fee is generally limited to cover the cost of regulation.
A. False, True, True, True
B. True, False, True, True
C. True, True, False, True
D. True, True, True, True
8. S1: Direct double taxation is prohibited by the Philippine Constitution.
S2: Indirect double taxation is not prohibited by the Philippine Constitution.
A. Only S1 is true

Page 1 of 6
 HIGHER ACADEMIA INC.
Department of Accountancy

B. Only S2 is True
C. Both are True
D. Both are false
9. In May 2, 2019, the BIR discovered that a certain taxpayer did not pay taxes on the sale of real property
in 2001. Can the BIR issue an assessment for the unpaid taxes?
A. Yes, the BIR can render an assessment up to May 2, 2029.
B. Yes, the government’s right to collect taxes never prescribe.
C. No, the BIR’s right to assessment already prescribed beyond the 10-year period.
D. No, BIR assessment should have been made within 3 years.
10. Taxpayers may claim as tax credit taxes which are paid in foreign countries. The following taxpayers
can claim tax credit except one:
A. Domestic corporations
B. Members or beneficiaries of partnership or trust
C. Resident Filipino citizens
D. Non-resident Aliens

11. Assume this data of a corporate taxpayer for the current taxable period:
Gross Sales 3,200,000
Cost of sales 1,900,000
Sales discounts granted (for timely payments) 100,000
Discounts granted to senior citizens and PWDs 80,000
Incidental income (operating) 200,000
Other income (non-operating) 150,000
Operating expenses 400,000
How much is the OSD?
A. 528,000
B. 560,000
C. 588,000
D. 620,000 (3.2M – 1.9M – 100k + 200k + 150k)x 40%
12. Using the same data above, how much is the net taxable income using OSD?
A. 792,000
B. 840,000
C. 882,000
D. 930,000 620k / 40% x 60%

13. Assume this data by an individual taxpayer for the current taxable period:
Gross Sales 3,200,000
Cost of sales 1,900,000
Sales discounts granted (for timely payments) 100,000
Discounts granted to senior citizens and PWDs 80,000
Incidental income (operating) 200,000
Other income (non-operating) 150,000
Operating expenses 400,000
How much is the OSD?

A. 1,240,000
B. 1,280,000
C. 1,288,000
D. 1,320,000 (3.2M -100k + 200k) x 40%
14. Using the same data, how much is the net taxable income using OSD?
A. 1,920,000
B. 1,980,000
C. 2,130,000 3.3M x 60% + 150k
D. 2,270,000
15. The records of the taxpayer show the following:
Gross Income 500,000
Capital Gain 50,000
Allowable operating expenses 200,000
Capital loss 70,000
Loss on business assets 60,000
Total deductions

Page 2 of 6
 HIGHER ACADEMIA INC.
Department of Accountancy

A. 200,000
B. 260,000
C. 280,000
D. 350,000
16. De Guzman, a resident citizen taxpayer, received the following interest income:
 80,000 from short-term peso time deposit
 16,000 from a 5-year bond issued by a commercial bank which qualifies as deposit substitute
 24,000 from a 5/6 lending to market vendors

How much final tax must have been withheld from De Guzman’s interest income?

A. 0
B. 16,000
C. 20,000 80k / 80 % x 20%
D. 24,000
17. A taxpayer with net sales of 2,000,000 and cost of sales of 1,800,000 incurred 15,000 entertainment,
amusement, and recreation expenses (EAR). Compute the allowable deduction from EAR expense.
Goods .5%, Services 1% vs Actual, whichever is lower
A. 20,000
B. 15,000
C. 10,000 2M x .5% vs. 15k
D. 0
18. Threshold of Uniform/Clothing allowance in 2025
A. 5,000
B. 6,000
C. 7,000
D. 8,000
19. B Corporation, a domestic corporation engaged in merchandising business, sold its parking lot for
3,500,000 payable on installment. The lot was previously acquired for 2,800,000. The buyer was
required to make a down payment in the amount of 200,000. The buyer has outstanding unpaid balance
of 2,700,000 as of December 31 of the taxable year 2023. Compute the gross income that must have
been recognized using the installment method.
Initial Payment = 200k + 600k
= 800k/3.5M
= 22.86%, installment is applicable
A. 160,000 3.5M – 2.8M = 700k x 22.86%
B. 120,000
C. 140,000
D. Installment does not apply
20. The situs of service income:
A. Where the payment of service is made
B. Where the service contract was perfected
C. Where the service is performed
D. Where the party availing the service is located
21. In November 2023, Ms. Gomez commenced her business. Assuming Ms. Gomez wanted to avail of
the OSD, when can she choose the option?
A. Upon commencement of the business
B. December 2023
C. Initial quarter of the taxable year after commencement of the business
D. Any quarter in 2024
22. Which of the following is not deductible from gross income?
A. Percentage tax
B. Excise tax
C. Documentary stamp tax
D. Final tax
23. Period of tax collection when an assessment is issued within the 3-year ordinary prescriptive period to
assess
A. 1 year
B. 3 years
C. 5 years
D. 10 years
24. Period of tax collection when an assessment is issued within the 10-year extraordinary period to assess
Page 3 of 6
 HIGHER ACADEMIA INC.
Department of Accountancy

A. 1 year
B. 3 years
C. 5 years
D. 10 years
25. It is the enforcement and implementation of tax laws.
A. Tax system
B. Tax collection
C. Tax administration
D. All of the above
26. Which of the following statements is not correct?
A. A tax is a demand of sovereignty.
B. A toll is a demand of ownership
C. A special assessment is a tax.
D. Customs duty is a tax.
27. Which of the following tax system applies to both individual and corporate taxpayers?
A. Graduated
B. Proportional
C. Regressive
D. All of the above
28. Philtrade Corporation reports a 20M taxable income for the fiscal year ending December 31, 2023.
Compute for the income tax due.
A. 4,000,000
B. 5,000,000 20M x 25%
C. 5,250,000
D. 5,750,000
29. A domestic corporation and resident foreign corporation is subject to the income tax rate of 25% based
on net income effective
A. Upon the effectivity of CREATE
B. July 1, 2020
C. January 1, 2020
D. January 1, 2021
30. A non-resident foreign corporation is subject to 25% final tax on its gross income derived from sources
within the Philippines effective
A. Upon effectivity of the CREATE
B. July 1, 2020
C. January 1, 2020
D. January 1, 2021
31. In 2021, Taprolani Corporation purchased a residential house and lot for 2,300,000. The property was
sold to the President of the Corporation for 2,500,000. The fair market value per BIR and per Assessor’s
Office were 3,500,000 and 3,000,000 respectively. How much is the fringe benefit tax?
A. 1,884,615
B. 1,615,385
C. 538,462
D. None
32. The following are common to the inherent power of taxation, power of eminent domain and police
power, except for which of the following?
A. They are necessary attributes of sovereignty.
B. They interfere with private rights and property.
C. They affect all persons or the public.
D. They are legislative in implementation.
33. Which statement is wrong? A revenue bill:
A. Must originate from the House of Representative and on the same bill the Senate may propose
amendments.
B. May originate from the Senate and on which the same bill the House of Representative may
propose amendments.
C. May have a House version and a Senate version approved separately.
D. May be recommended by the President to Congress.
34. S1: The seller is the person liable to pay the capital gains tax if there is no agreement.
S2: All passive income derived from within the Philippines is subject to final withholding tax.
A. True, False
B. False, True

Page 4 of 6
 HIGHER ACADEMIA INC.
Department of Accountancy

C. Both are True

D. Both are False
35. S1: Nicanor, an employee is not qualified to use the 8% preferential taxation.
S2: Nicanor, a sari-sari store owner, is allowed to use 8% optional tax.
A. True, False
B. False, True
C. Both are True
D. Both are False
36. A taxpayer received the following items of income during the taxable year:
Income from BPI- Espana Branch from checking account 62,000 x 20%
Interest income from BDO – Intramuros Branch from savings deposit 38,500 x 20%
Interest from PNB – Quiapo Branch from 42,000 x 15%
foreign currency deposit account under the expanded
currency deposit system
Interest income from dollar deposit on Bank of New Jersey in the 130,000
United States
Interest income from promissory note of Mr. X, Philippines 58,400
Interest income from promissory note of Mr. X, United States 62,000
Yield from deposit substitute, Philippines 87,000 x 20%
Interest from Philippine government securities 21,000 x 20%
Interest income from long-term deposits, Philippines 57,000
Interest income from long-term deposits, Egypt 62,500
Royalties from books, Philippines 16,000 x 10%
Royalties from paintings, Philippines 60,000 x 20%
Royalties from musical compositions, Japan 50,000

If the taxpayer is a resident citizen, how much is the final withholding tax?
A. 57,400
B. 61,600
C. 63,200
D. 66,600
37. Using the above information considering the taxpayer is a non-resident citizen, how much income is
subject to regular income tax?
A. 58,400 Only the interest income from promissory note, Phil
B. 100,400
C. 108,400
D. 120,400
38. Kara sold to Mia shares of stocks of a foreign corporation at a selling price of 1,000,000 with an
acquisition cost of 380,000. On the same date, Kara sold to Mia shares of stocks of a domestic
corporation at a selling price of 600,000, and an acquisition cost of 400,000. If Kara is a resident citizen
and is not a dealer in securities, and the shares were sold directly to Mia, how much is the capital gains
tax due of Kara from the transaction?
A. 0
B. 30,000 600k – 400k = 200k x 15%
C. 93,000
D. 123,000
39. Using the above information, if Kara is a resident citizen and is not a dealer in securities, and the shares
were sold directly to Mia, how much of Kara’s income is subject to regular income tax?
A. 0
B. 200,000
C. 620,000 1M – 380K
D. 820,000
40. If Kara is a resident citizen and is a dealer in securities, and the shares were sold directly to Mia, how
much is the capital gains tax due of Kara from the transaction?
A. 0
B. 30,000
C. 93,000
D. 123,000
41. A lawyer, a civil engineer and a CPA established a partnership for the rendition of consultancy services.
How shall the income of the partnership be taxed?
A. It will be taxed like a taxable corporation.

Page 5 of 6
 HIGHER ACADEMIA INC.
Department of Accountancy

B. It will be taxed like a self-employed individual.

C. It will be taxed like a pure compensation income earner.
D. It will be exempted from payment of income tax.

42. Which of the following is not subject to corporate income tax?

A. General professional partnership
B. Joint Venture
C. Insurance companies
D. Joint stock companies
43. Which of the following GOCC is subject to corporate income tax?
A. Social Security System
B. Government Service Insurance System
C. Philippine Health Insurance Corporation
D. Landbank of the Philippines
44. Which corporation is subject to final withholding tax for its ordinary income?
A. Domestic corporation
B. Resident foreign corporation
C. Nonresident foreign corporation
D. All of the above
45. Under the CREATE Act, the rate of withholding tax on ordinary income derived by nonresident foreign
corporations in the Philippines is:
A. 20%
B. 25%
C. 20% or 25%, depending on the taxpayer’s taxable income and assets
D. 30%

PREPARED BY:

MS. JANINE LOU M. MUAN, MBA, CPA

Instructor

Page 6 of 6