CPA REVIEW CENTER

TAX00Q – CORPORATION

The AB Corporation, established in 1990, provided the following data for calendar year
ending December 31, 2017 ($1=P50)

Philippines Abroad
Gross Income P4, 000,000 $40,000 2m
Deductions 2,500,000$15,000 750k
Income Tax Paid $3,000 150k

1. Assume AB Corp. is a domestic corporation. Compute the income tax after tax credit.
a. P812,500 b. P832,000 c. P962,500 d. P675,000

2. Assume AB Corp. is a domestic corporation, compute the income if it opts to claim the tax
paid abroad as deduction from gross income.
a. P910,000 b. P832,000 c. P780,000 d. P275,000

3. Assume AB Corp. is a resident corporation, its income tax is

a. P730,000 b. P1,280,000 c. P480,000 d. P450,000

4. Assume AB Corp. is a non-resident corporation, its income tax is

a. P730,000 b. P1,200,000 c. P880,000 d. P1,400,000

5. If AB Corp. is a private educational institution, its income tax due after tax credit
a. P730,000 b. P832,000 c. P275,000 d. P125,000

6. If AB Corp. is a non-profit hospital, its income tax after tax credit is

a. P730,000 b. P832,000 c. P275,000 d. P125,000

7. If AB Corp. is a resident international carrier its income tax is

a. P100,000 b. P10,000 c. P37,000 d. P125,000

8. If AB Corp. is a non-resident lessor of vessels, its income tax is

a. P1,000,000 b. P180,000 c. P300,000 d. P128,000

9. If AB Corp. is a non-resident cinematographic film owner/lessor, its income tax is

a. P1,000,000 b. P180,000 c. P375,000 d. P128,000

10. If AB Cop. is resident lessor of aircrafts, machineries and equipment, its income tax is
a. P100,000 b. P180,000 c. P300,000 d. P128,000

11. If AB Corp. is a resident corporation but its expenses within and outside the Philippines is
P3M, unallocated (disregard original data on expenses), its income tax is
a. P600,000 b. P571,000 c. P196,000 d. P612,750

12. If AB Corp. is a resident corporation and it remitted 60% of its net profit to its head office
abroad, its total tax liability is (use original data)
a. P480,000 b. P544,500 c. P196,000 d. P612,750

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13. If AB Cop. is a private educational institution but P3.5M of its total gross income is from
lease and restaurant business, its income tax is
a. P730,000 b. P675,000 c. P150,000 d. P812,500

14. If AB Corp. is a domestic corporation, but its total expense is P5,800,000 (disregard original
data on expenses), its income tax is
a. P730,000 b. P64,000 c. P120,000 d. P85,000

15. If AB Corp. is a non-stock educational institution, which uses all its revenue or income for
educational and charitable purposes, its income tax is
a. P0 b. P730,000 c. P120,000 d. P64,000

16. One of the following is not acceptable as basis of relief from the MCIT
a. Prolonged labor dispute c. Legitimate business reverse
b. Force majeure problem d. Law suits filed by the company

17. Which is not one of the characteristics of corporate income tax

a. Progressive tax b. Direct tax c. General tax d. National tax

18. A Corporation, a resident corporation, provided the following data for taxable year 2016

Philippines USA
Gross Income P 40M P 20M
Dividends from:
Domestic corporation 5M
Foreign corporation 4M
Business expenses 12M 8M

The corporation remitted to its head office the P5M dividend income and 40% of its net
profit to its head office in USA. (85% of the income of the foreign corporation which declared
dividends is from the Philippines.) The corporation’s total tax liability including the tax on
the profit remitted is P9,576
a. P10,240,000 b. P11,545,600 c. P15,960,000 d. P12,448,000

19. The branch of Atlanta Corporation, a foreign corporation, reported P500,000 taxable
income in 2017. It also earned P100,000 dividend income from a domestic corporation.
Assuming the branch earmarked the entire dividend and half of its profits for remittance to
its head office. Compute the net remittance.
a. P275,000 b. P305,000 c. P242,500 d. P248,750

20. TriniHeights, Inc., a domestic corporation, declared P4,000,000 dividends to all its
shareholders which include its parent company (the only corporate shareholder) which
holds 60% of its outstanding issued shares. How much would TriniHeights withhold in final
tax?
a. P 0 b. P160,000 c. P240,000 d. P400,000

The outstanding balance of excess of MCIT over normal tax in prior period is P 100,000.
During the current taxable year, the corporation has gross income of P 8,000,000 and
operating expenses of P 7,850,000.

21. The income tax payable for the current year is

a. P 160,000
b. P 100,000
c. P 60,000

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 d. P 52,500
22. Assuming that the operating expenses is P 7,000,000 instead of P 7,850,000, the income tax
payable for the current year is
a. P 350,000
b. P 250,000
c. P 200,000
d. P 160,000

After 2 years of operation, a domestic corporation reported the following income and
expenses:
3rd year 4th year 5th year 6th year
Sales P1,000,000 P2,500,000 P4,000,000 P5,000,000
Cost of sales 600,000 1,200,000 2,400,000 2,700,000
Operating expenses 300,000 1,300,000 1,400,000 1,500,000
Royalty income, net of tax 80,000 160,000 120,000 40,000
Interest income, net of tax 20,000 32,000 16,000 24,000
Dividend income (Domestic) 50,000 60,000 70,000 80,000
Rent income 200,000 300,000 100,000 50,000
Quarterly tax paid 10,000 20,000 30,000 40,000

Required: Compute for the following:

1. Income tax still due and payable
2. Final tax.

1. 3rd year 4th year 5th year 6th year

Sales P1,000,000 P2,500,000 P4,000,000 P5,000,000
Cost of sales ( 600,000) (1,200,000) (2,400,000) (2,700,000)
Rent income 200,000 300,000 100,000 50,000
Gross income P 600,000 P1,600,000 P1,700,000 P2,350,000
Operating expenses allowed ( 300,000) (1,300,000) (1,400,000) (1,500,000)
Net taxable income P 300,000 P 300,000 P 300,000 P 850,000
Multiplied by NCIT rate 30% 30% 30% 30%
Income tax due P 90,000 P 90,000 P 90,000 P 255,000
Quarterly tax paid ( 10,000) ( 20,000) ( 30,000) ( 40,000)
Income tax still due and payable P 80,000 P 70,000 P 60,000 P 215,000

2. 3rd year 4th year 5th year 6th year

Royalty income, net of tax P 80,000 P160,000 P120,000 P 40,000
Interest income, net of tax 20,000 32,000 16,000 24,000
Total passive income, net of tax P100,000 P192,000 P136,000 P 64,000
Divide by 80% 80% 80% 80%
Total gross passive income P125,000 P240,000 P170,000 P 80,000
Multiplied by final tax rate 20% 20% 20% 20%
Final taxes P 25,000 P 48,000 P 34,000 P 16,000

The income statement of X Corporation prepared under GAAP rules is as follows:

Sales P 10,000,000
Less: Cost of sales 6,000,000
Gross profit P 4,000,000
Less: Operating expenses:
Salaries P1,000,000
Depreciation 300,000
Supplies 200,000
Bad debts (percent of accounts receivable) 100,000
Interest expense 50,000 1,650,000

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Operating income P 2,350,000
Add: Other revenues:
Interest income, net of tax P 32,000
Cash dividend (domestic) 68,000 100,000
Income before other expense P 2,450,000
Less: Losses on investment in securities 250,000
Net income before tax P 2,200,000

Required: Determine the correct amount of the following:

1. Reportable gross income per ITR.
2. Net taxable income per ITR.
3. Final withholding tax paid.
4. Net income per GAAP after income tax.

1. Sales P10,000,000
Less: Cost of sales 6,000,000
Reportable gross income per ITR P 4,000,000

2. Gross profit P4,000,000

Less: Operating expenses:
Salaries P1,000,000
Depreciation 300,000
Supplies 200,000
Interest expense [P50,000 – (P32,000/80% x 33%) 36,800 1,536,800
Net taxable income per ITR P2,463,200
Note:
 Interest income is subject to final tax of 20%
 Inter-corporate dividend is tax-exempt.
 Losses on investment in securities is not deductible – capital loss

3. Final withholding tax paid (P32,000/80%) x 20% P 8,000

4. Net income before tax per GAAP P2,200,000
Less: Income tax (P2,463,200 x 30%) 738,960
Net income P1,461,040

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