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Chapter 10: CONCEPTS OF VAT

CHAPTER 10
CONCEPTS OF VAT
Problem 101
1. True
2. False Some sales are VAT-exempt.
3. False the buyer is legally liable for the payment of VAT on importation of goods or services.
4. True
5. True
6. False Goods and services sold outside the Philippines are either zero-rated or VAT-exempt.
7. False VAT is not a specific tax, but an ad valorem tax because its computation is based on
the value of goods or services sold.
8. True
9. False 4%.
10. True
11. True
12. False regardless of the amount of sales, a VAT-registered person is subject to VAT.
13. False the privilege of input VAT is granted only to VAT-registered taxpayer.
14. False Subject to VAT whether for business or not.
15. False To be treated separately.

Problem 102
1. True
2. False should not be subjected to the same tax.
3. False VAT sales invoice or VAT official receipt.
4. True
5. True for as long as the buyer is VAT-registered.
6. False VAT refund.
7. False excess of input VAT over output VAT.
8. False importation is subject to VAT whether for business or personal use.
9. True
10. True
11. False goods for sale is not covered by the P1,000,000 threshold. The goods must
depreciated/amortized as a result of use in business.
12. False only zero-rated/ effectively zero-rated sales and cancellation of VAT registration can
apply for TCC issuance.
13. True
14. False the resident lessee or licensee must file the VAT return in the name of nonresident
foreign entity.
15. True

Problem 103
1. True
2. False deductible from the VAT-registered buyers output VAT.
3. True
4. True
5. False the transitional input VAT is allowed only once upon shifting from non-VAT to VAT.
6. False presumptive input VAT is allowed only to raw materials used in the production of few
products such as milk, sardines, mackerel, refined sugar, cooking oil, and instant noodles.
7. True
8. True
9. False input VAT is recognized in effectively zero-rated sales.
10. False within 2 years.

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Chapter 10: CONCEPTS OF VAT
11. True
12. True
13. False more than P1,000,000.
14. True
15. True

Problem 104 Problem 105


1. B 1. C
2. A 2. D
3. B 3. A
4. D 4. B
5. C 5. C
6. D 6. D
7. C 7. C
8. C 8. D
9. A 9. B
10. C 10. D
11. A 11. A
12. B 12. C
13. A

Problem 106 D
The sale of Y is not subject to VAT because its registration is nonVAT and its sales do not exceed
P1,919,500.

Problem 107 A
Mar Roxas non-VAT P300,000
Baguio City Government 200,000
SSS Baguio 100,000
San Marino 400,000
Total amount subject to VAT P 1,000,000

Problem 108 C
Sales to: Within
Regular customers P2,000,000
Government 500,000
Employees 300,000
Total amount of sale subject to VAT P2,800,000

Problem 109 D
The ultimate consumer is not VAT-registered and does not sale the products. Therefore, no
output VAT. If the consumer is VAT-registered still there is no output VAT, but instead input
VAT.

Problem 1010 A
Output VAT (P5,000,000 + P5,000,000) x 12% P1,200,000
Less: Input VAT (P6,720,000/9.333) 720,000
Net VAT payable P 480,000

Problem 1011 C
Sales per VAT invoice, no output VAT is shown (P224,000/9.333) P24,000
Sales per VAT invoice, output VAT shown separately
amounted to P30,000 inclusive in the invoice (P330,000/9.333) 35,358
Sales per purchase order delivered (P100,000 x 12%) 12,000
Amount of output VAT P71,358

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Chapter 10: CONCEPTS OF VAT
Problem 1012 D
Total manufacturing costs P1,000,000
Delivery and insurance 200,000
Excise tax (P1,000,000 x 10%) 100,000
Gross margin (P1,000,000 x 70%) 700,000
Total sales price P2,000,000
Multiplied by VAT rate 12%
Output VAT P 240,000

Problem 1013 B
Fair market value of machine P1,500,000
Freight charges 100,000
Insurance charges 50,000
Duty tax 150,000
Excise tax 75,000
Total Vatable amount P1,875,000
Multiplied by VAT rate 12%
VAT on importation P 225,000

Problem 10-14 B
Output VAT [(P1,800,000/30%)/40%] x 12% P1,800,000
Less: Input VAT (P8,960,000/9.333 960,000
Net VAT payable P 840,000

Problem 10 15 D
Total sales (P2,000,000 + P800,000) P2,800,000
Multiplied by VAT rate 12%
VAT payable P 336,000

Problem 10 16 B
Output VAT (P40M x 4 x 12%) P19,200,000
Less: Ouput VAT (P180M /5) x 4 x 12%) 17,280,000
Net VAT payable P 1,920,000

Supporting computations:
Purchase price P100,000,000
Excise taxes 40,000,000
Duty taxes 30,000,000
Insurance 5,000,000
Freight 5,000,000
Total landed cost P180,000,000

Problem 10 17 D
Gross receipts sale of electricity P 5,000,000
Sale of assets:
Power general assets 30,000,000
Other real properties 20,000,000
Total P55,000,000
Multiplied by VAT rate 12%
Output VAT P 6,600,000

Problem 10 18 A
Zero. The business is non-VAT; hence, no input VAT is allowed.

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Chapter 10: CONCEPTS OF VAT
Problem 10 19 A
Output VAT (P425,600/9.3333) P45,600
Less: Input VAT (P448,000/9.3333) 48,000
Input VAT carry-over P 2,400

VAT-registered buyers of non-VAT business that collects VAT is allowed to deduct input VAT.

Problem 10 20 D
Input VAT from:
VAT invoice in the name of Capoy Enterprises (P224,000/9.333) P 24,000
NonVAT invoice with VAT charges (P168,000/9.333) 18,000
Total creditable input VAT P42,000

The VAT invoice in the name of Capuypoy Trading is not allowed because it does not bear the
name of Capoy Enterprises.

Problem 10 21 B
Input VAT from VAT purchased invoice (P1,792,000/9.333) P192,000
Non-VAT purchase invoice (P313,600/9.333) 33,600
Transitional input VAT 5,800
Total input VAT from purchases P231,400
Less: Proportionate input VAT for sales to the government
(P192,000 + P33,600) x 500/2,000 56,400
Input VAT balance P175,000
Add: Standard input VAT on sales to government (P560,000/9.333) x 7% 35,000
Total creditable input VAT P210,000

Problem 10 22 A
Purchases per VAT invoice amount (P140,000/9.3333) P 15,000
Payments for VAT persons services inclusive of VAT (P1,232/9.3333) 132
Payment for services of VAT person, net of VAT (P917 x 12%) 110
Total available input VAT P 15,242

Problem 10 23 C
Input VAT from:
Machine 1 inventory (P1,680,000/9.333) P180,000
Amortization of input VAT from:
Machines 2 and 3 [(P672,000 + P560,000)/9.333]/60 months 2,200
Creditable input VAT January P182,200
Note: Machines 2 and 3 are depreciable capital goods with aggregate costs of P1,100,000
excluding VAT; hence, their input VAT is subject to amortization of 60 months or estimated
useful life, whichever is shorter.

Problem 10 24 D
January February March
Output VAT P120,000 P156,000 P180,000
Input VAT from purchases of:
Goods (72,000) (84,000) (96,000)
Capital goods March acquisition (60,000)
Capital goods February acquisition . ( 3,000) ( 3,000)
Net VAT payable (refundable) P 48,000 P 69,000 P21,000

Problem 10 25
1. Letter B
Total costs incurred to date
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Year 1 P4,000,000
Year 2 8,000,000 P12,000,000
Multiplied by percent of construction costs subject to VAT 60%
Construction costs subject to VAT P 7,200,000
Multiplied by VAT rate 12%
Creditable input VAT in year 2 P 864,000

2. Letter C
Output VAT P3,600,000
Less: Input VAT from purchases P1,200,000
Input VAT from construction in progress
Year 3 (P3,000,000 x 60% x 12%) 216,000 1,416,000
Net VAT payable P2,184,000

Problem 10 26 A
Output VAT P6,000,000
Less: Input VAT from purchases P2,000,000
Input VAT from CIP:
Materials (P3,600,000 x 30%) 1,080,000
Labor (P2,400,000 x 20%) 480,000
Overhead (P1,200,000 x 20%) 240,000 3,800,000
Net VAT payable P2,200,000

Problem 10 27
1. Letter D
Purchases from VAT person (P644,000/9.333) P69,000
Purchases from Non-VAT person in VAT invoice (P61,600/9.333) 6,600
Payments to VAT services (P56,000/9.333) 6,000
Total creditable input VAT P81,600

2. Letter A
Output VAT (P784,000/9.333) P 84,000
Less: Creditable input VAT 81,600
Net VAT payable (refundable) P 2,400

Problem 10 28 B
Equipment (P2,500,000 x 12%) = P300,000/60 P 5,000
Supplies (P10,000 x 12%) 1,200
Goods (P800,000 x 12%) 96,000
Creditable input VAT P102,200

Problem 10 29 C
Siopao machine (P300,000 x 1) P300,000
Siomai machines (P250,000 x 2) 500,000
Pizza machines (P200,000 x 3) 600,000
Oven (P150,000 x 4) 600,000
Total amount P2,000,000
Add: Custom duty (P2,000,000 x 10%) P200,000
Excise tax (P2,000,000 x 5%) 100,000
Storage fee (P2,000,000 x 2%) 40,000 340,000
Total landed costs P2,340,000
Multiplied by VAT rate 12%
Input VAT P 280,800

Problem 10 30
1. Letter A
Total machines imported (P100,000 + P200,000 + P300,000) P 600,000
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Add: Excise tax (P600,000 x 50%) 300,000
Total P 900,000
Multiplied by VAT rate 12%
VAT paid on importation P 108,000

2. Letter D
Output VAT (P1,000,000 x 12%) P 120,000
Less: Creditable input VAT:
Machine 2 (P200,000 + P100,000) x 12% P36,000
Machine 3 (P300,000 + P150,000) x 12% 54,000 90,000
VAT payable P 30,000

Problem 10 31 D
Actual input VAT (P896,000 x 20%)/9.333, higher P19,200
Transitional input VAT (P1,500,000 x 50%) x 2% 15,000
Total transitional input VAT allowed, the higher amount P34,200

Problem 10 32 A
Output VAT (P1,600,000 + P2,000,000) x 12% P432,000
Less: Other percentage tax paid 48,000
Output VAT balance P384,000
Less: Input VAT from purchases August to December P240,000
Transitional input VAT, (P100,000 x 2%) = P2,000; higher - actual 34,000 274,000
Net VAT payable P110,000

Problem 10 33 B
Prime raw materials coconut for cooking oil (P1,000,000 x 3/5) P600,000
Multiplied by presumptive VAT rate 4%
Presumptive input VAT P 24,000

Problem 10 34 C
Output VAT (P2,800,000/9.333) P300,000
Less: Input VAT from
Presumptive input VAT sardines (P800,000 x 4%) P32,000
Supplies (P50,400/9.333) 5,400
Amortization of capital goods [(P1,232,000/9.333)/60] x 3 months 6,600 44,000
Net VAT payable P256,000

Problem 10 35 B
Output VAT (P600,000 + P1,500,000) x 12% P252,000
Less: OPT (P600,000 x 3%) 18,000
Output VAT balance P234,000
Less: Transitional input VAT (P100,000 x 2%) P 2,000
Presumptive input VAT (P800,000 P200,000) x 4% 24,000 26,000
Net VAT payable P208,000

Note: The basis of presumptive input VAT is the gross value of the purchased raw materials used
in the production.

Problem 10 36 C
Input VAT from purchases second quarter (P5,040,000/9.333) P540,000
Input VAT carry-over from first quarter 57,000
Input VAT - Purchases returns (P50,000 x 12%) ( 6,000)
Input VAT amortized on capital goods (P180,000/60) x 3 9,000
Creditable input VAT second quarter P600,000

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Chapter 10: CONCEPTS OF VAT
Problem 10 37 B
Amount of input VAT allowed for VAT refund or
Issuance of TCC (P600,000 x 20/50) export sales or zero-rated VAT related P240,000

Problem 10 38 C
Input VAT from importation (P1,120,000/9.333) P120,000
Input VAT per VAT invoice issued
by nonVAT person (P896,000/9.333) 96,000
Total input VAT refund P216,000

Problem 10 39 A
Output VAT on actual sales [P400,000 + (P560,000/1.12)] x 12% P108,000
Add: Output VAT on deemed sales (P30,000 + P20,000) x 12% 6,000
Total output VAT P114,000
Less: Other percentage tax paid (P400,000 x 3%) 48,000
Output VAT balance P 66,000
Less: Input VAT from:
Purchases (P672,000/9.333) P72,000
Input VAT previous quarter 42,000
Transitional input VAT 2,000 116,000
Input VAT carry-over (P50,000)

D
Problem 10 40
Contract price P6,720,000
Less: VAT withholding (P6,720,000/9.333) P 720,000
Final withholding income tax (P6,000,000 x 7.5%) 450,000 1,170,000
Net remittance to Japan Inc. P5,550,000

Problem 10 41
1. Total Output VAT (P1,344,000/9.333) P 144,000

2. Total Output VAT P144,000


Less: Input VAT
VAT purchase invoice amount (P840,000/9.333) 90,000
Net VAT payable P 54,000

Problem 10 42
1. Output VAT (P880,000 + P720,000) x 12% P 192,000

2. Output VAT P 192,000


Less: Input VAT (P1,200,000 x 12%) 144,000
Net VAT payable P 48,000

Problem 10 43
1. Output VAT (P125,000 x 12%) P 15,000

2. Input VAT (P84,000/9.3333) P 9,000

Note: The sales is multiplied by 12% because the term used is not per VAT invoice while the
purchase is divided by 9.333 because the purchase is inclusive of VAT.

Problem 10 44
Total sales price (P20 x 10) P 200
Add: VAT (P200 x 12%) 24
Total sales invoice amount P 224

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Problem 10 45
1. Net income (P570,000/30%) P1,900,000
Less: Gain on sale of capital asset 50,000
Net operating income P1,850,000
Add: Cost of sales (P120,000/12%) P1,000,000
Sales discounts due to prompt payments 150,000
Operating expense before taxes 990,000
Community tax 10,000 2,150,000
Vatable base Sales subject to VAT P4,000,000

2. Output VAT (P4,000,000 x 12%) P 480,000

3. Output VAT P 480,000


Less: Input VAT 120,000
VAT payable P 360,000

Problem 10 46
1. Net income (P600,000/30%) P2,000,000
Less: Gain on sale of capital asset 150,000
Net operating income P1,850,000
Add: Cost of sales (P240,000/12%) P400,000 P1,600,000
Sales discounts due to prompt payments 45,000
Operating expenses before taxes 1,000,000
Community tax 5,000 2,650,000
Sales subject to VAT P4,500,000

Output VAT (P4,500,000 x 12%) P540,000


Less: Input VAT from purchases P240,000
Presumptive input VAT 60,000 300,000
Net VAT payable P240,000
Add: Surcharge (P240,000 x 25%) P60,000
Interest from Jan. 25 to Mar. 25 (P240,000 x 20% x 2/12) 8,000
Compromise for late payment 1,000 69,000
Total amount payable P309,000

2. None, because the payment of income tax is made on time April 15, of
the succeeding year.

Problem 10 47
Importation for business use P1,000,000
Add: Customs duties (P1,000,000 x 50%) 500,000
Total P1,500,000
Add: Excise tax (P1,500,000 x 10%) 150,000
Total P1,650,000
Multiplied by VAT rate 12%
Creditable Input VAT P 198,000

Problem 10 48
1. Output VAT (P1,456,000/9.3333) P156,000

2. Input VAT (P1,120,000/9.3333) P120,000

3. Net VAT payable (P156,000 P120,000) P 36,000

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Chapter 10: CONCEPTS OF VAT
Problem 10 49
1. Net income (P1,200,000/30%) P4,000,000
Add: Operating expenses (P2,540,000- P240,000) 2,300,000
Gross income P6,300,000
Add: Cost of sales (P3,360,000/1.12) P3,000,000
Less: Increase in inventory 300,000 2,700,000
Sales P9,000,000

2. Output VAT (P9,000,000 x 12%) P1,080,000


Less: Input VAT from purchases (P3,360,000/9.333) P360,000
Input VAT from operating expenses 240,000
Input VAT from CIP:
Materials (P560,000 + P448,000 + P672,000)/9.333 180,000
Labor (P1,500,000 x 40%) x 12% 72,000
Overhead (P1,500,000 x 20%) x 12% 36,000 888,000
Net VAT payable P 192,000

Problem 10 50
Non-VAT
Total sales as of November 1, 201B P1,900,000
Add: Sales on November to December 201B
(P672,000/1.12) + P100,000 = P700,000/70% 1,000,000
Total sales P2,900,000
Multiplied by VAT rate 12%
Output VAT P 348,000
Less: Other percentage tax paid 57,000
Output VAT balance P 291,000
VAT-registered
Output VAT P 348,000
Less: Other percentage tax paid 57,000
Output VAT balance P 291,000
Less: Transitional input VAT
(P672,000/1.12) + (P100,000) = P700,000 x 2% = P14,000
(P672,000/9.333) = P72,000, higher + (P100,000 x 2%) 74,000 217,000
VAT advantage to register under VAT system P 74,000

Alah Nganin should register under VAT system.

Problem 10 51
Output VAT (P5,000,000 x 12%) P600,000
Less: Input VAT from:
Supplies (P784,000/9.333) P84,000
Rent (P214,000/107%) x 12% 24,000
Creditable input VAT
from previous period 112,000
Presumptive input VAT
(P2,200,000 P200,000) x 2% 40,000 260,000
Net VAT payable P340,000

Problem 10 52
Output VAT (P3,000,000 x 12%) P360,000
Less: Transitional input VAT (P100,000 x 2%) P 2,000
Presumptive input VAT (P1,620,000 x 4%) 64,800
Input VAT from operating expenses 3,600 70,400
Net VAT payable P289,600

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Chapter 10: CONCEPTS OF VAT
The presumptive input VAT is based on primary raw materials used. The primary raw materials
used during the period are computed as follows:

Copra raw materials, beginning P 100,000


Add: Purchases of copra from farmers 1,900,000
Total P2,000,000
Less: Copra raw materials, ending 380,000
Copra raw materials used P1,620,000

Problem 10 53
Output VAT P200,000
Less: Input VAT from:
Purchases P240,000
Carry-over from last quarter 30,000
Capital goods (P180,000/60) 3,000 273,000
Creditable input VAT for next quarter (P 73,000)

Problem 10 54
1. Input VAT from purchases for business (P112,000/9.333) P 12,000
Input VAT from importation (P79,520/9.333) 8,520
Creditable input VAT for the period P20,520
Less: Output VAT 20,000
Input VAT carry-over P 520

2. Input VAT carry-over (P20,520 P20,520) P - 0 -

Problem 10 55
Input VAT on Depreciable Capital Goods from purchase of
Truck (P1,120,000/9.333) P120,000
Processing machine (P1,568,000/9.333)/60 x 1 2,800
Total Input VAT for the last quarter P122,800

Note: The Input VAT from the purchase of truck should not be amortized because its cost does
not exceed P1,000,000.

Problem 10 56
Transitional input VAT P 40,000
Presumptive input VAT 50,000
Input VAT on purchases of depreciable capital goods (P180,000 x 10/15) 120,000
Input VAT on operating expenses (P96,000 x 10/15) 64,000
Input VAT not allowed for TCC issuance P274,000

Only input VAT that can be traced or allocated to zero-rated or effectively zero-rated is allowed for
issuance of TCC. Transitional and presumptive input VATs are not allowed for TCC issuance.

Problem 10 57
VAT invoice in the name of Busal Enterprises (P448,000/9.333) P 48,000
NonVAT invoice charged with VAT (P313,600/9.333) 33,600
Total input VAT P 81,600
Multiplied by percent of VAT for regular sales (P1M/P1.5M) = 2/3 2/3
Creditable input VAT from regular VAT sales P 54,400

The input VAT on sales to government is subject to SIV and is deductible only from the Output
VAT on sales to the government. Its actual input VAT of P18,000 is not allowed to be deducted
from output VAT. (R.A. 9337)

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Problem 10 58
Input VAT carry-over P 24,000
Input VAT from purchases 60,000
Input VAT capital goods 240,000
Total P324,000
Less: Adjustments:
Input VAT on purchase returns
(P100,000 x 12%) P 12,000
Input VAT on VAT-exempt sales
(P60,000 x 5/20) 15,000
Unamortized portion of input VAT
on capital goods
(P240,000 (P240,000/60) 236,000 263,000
Adjusted creditable input VAT P 61,000

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