EXERCISES 17-1

1. No. The discounts are not excludible from the gross selling price because they are
granted only upon the subsequent happening of an event or fulfillment of certain
conditions, such as prompt payment or attainment of sales goals by its customers
(VAT Ruling 204-90, Oct. 16, 1990).

2. I will inform Josefa Alvarado that Revenue Memorandum Circular No. 8-99, dated
January 20, 1999, requires that output tax on the sale of goods, properties and
services must not be indicated separately in the sales invoice or official receipt.
However, this memorandum circular has already been repealed by Revenue
Regulation 16-2006 which requires that all output taxes must be billed separately in
the invoice. Thus, the information gathered by her is already obsolete.

3. The taking of the goods from the grocery is a case of consumption not in the course of
business of goods originally intended for sale in the course of business which is a
deemed sale transaction. Therefore the amount corresponding to the goods taken are
subject to output tax.

4. The sale by First Unibrand Food Corporation (FUFC) is a sale not in the course of
business of all the properties which are originally intended for use in the course of
business. Therefore, it is a deemed sale transaction which is subject to VAT.
Such being the case, the sale by FUFC of all its machineries to its parent
company, NIKON, is subject to 12% VAT (BIR Ruling 057-99).

5. No, the house and lot is not held primarily to customers or held for lease in the
ordinary course of trade or business of Gabby. Moreover, the unit in the subdivision is
intended for low-cost housing under RA 7279.

7. Yes, the transaction between Isuki Company and Lyco Corporation is a case of a
foreign currency denominated sale because the sale is made to a nonresident to
which the goods are to be delivered to a resident of the Philippines and to be paid in
acceptable foreign currency in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas.

EXERCISES 17-2
1. The discount should be based on the gross selling price. The prompt payment
discount is not deductible from the selling price for purposes of computing value-
added tax because the granting of which depend upon the happening of a future
event Thus, the amount to be paid by Paloma to Papsi Cokla Company is computed
as follows:
Price per case P 100
Less: Discount (2% x P100) 2
Net amount 98
Add: VAT (100 x 12%) 12
Payable per case 110
x Number of cases purchased 10
Actual amount payable to supplier P1,100

2. Cash sales P
1,760,000

65
 Sales on account 513,000
Total 2,273,000
Less: Sales returns and allowances P 16,500
Sales discounts 16,500 33,000
Taxable base 2,240,000
Multiply by 3/28
Output tax 240,000
Less: Input tax 230,000
VAT payable 10,000

3. a. The seller and the buyer are subject to VAT.

Sales book of Advance Company.
Cash P 13,440
Output tax (13,440 X 3/28) P 1,440
Sales 12,000

Purchase book of Bestbooks

Enterprises.
Purchases 12,000
Input tax 1,440
Cash 13,440

b. Seller is VAT-registered while buyer is

not.
Sales book of Advance Company.
Cash 13,440
Output tax 1,440
Sales 12,000

Purchase book of Bestbooks

Enterprises.
Purchases 13,440
Cash 13,440

c. Buyer is VAT-registered while the seller is

not.
Purchase book of Bestbooks Enterprises.
Purchases 13,440
Cash 13,440

Sales books of Advance Company.

Cash 13,440
Sales 13,440

4. A. JANUARY
Input tax P 13,200
Inventory (660,000 x 2%= 13,200) vs. 13,200
40,000

Purchases 500,000

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 Input tax 60,000
Cash 560,000.0
0

Cash 1,344,000
Output tax (1,344,000 X 3/28) 144,000
Sales 1,200,000

Output tax 144,000

Input tax (13,200 + 60,000) 73,200
VAT payable 70,800

B. FEBRUARY

VAT payable 70,800

Cash 70,800

Purchases 550,000
Cash 550,000

Equipments 50,000
Input tax (50,000 x 12%) 6,000
Cash 56,000

Cash 336,000
Output tax 36,000
Sales 300,000

Cash 23,520
Input tax 2,520
Purchase returns 21,000

Sales returns 33,000

Output tax 3,960
Cash 36,960

Output tax (36,000 – 3,960) 32,040

Input tax (6,000 – 2,520) 3,480
VAT payable 28,560

5. a. VAT Business
Purchases 50,000
Cash 50,000

Non-VAT Business
Purchases 20,000
Cash 20,000

b. VAT Business
Purchases 80,000
Input tax (89,600 x 3/28) 9,600
Cash 89,600
Non-VAT Business
Purchases 22,736

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 Cash 22,736

c. Supplies 32,200
Input tax (34,944 x 3/28) 3,744
Cash 34,944

Equipment 32,200
Input tax 3,864
Cash 36,064

d. VAT Business (exclusive of tax)

Cash 448,000
Output tax 48,000
Sales 400,000

Non-VAT Business
Cash 100,000
Sales 100,000

e. Sales – VAT Business P 400,000

Sales – Non-VAT Business 100,000
Total sales 500,000

Supplies [3,744 - (4/5 x 3,744)] 748.80

Equipment [3,864 – (4/5 x 3,864] 772.80
Input tax 1,521.60

f. Output tax 48,000.00

Input tax 15,686.4
0
VAT payable 32,313.6
0
6. Sales (594,000 x 3/28) P
63,642.86
Less: Sales returns (13,200 x 3/28) 1,414.29 62,228.
57
Deemed sales:
Payment to creditors ) 27,500
Consignment sales 34,100
Out on consignment 68,750
Goodwill to employees 11,000
Total 141,350
Multiply by 3/28 15,144.6
4
Output tax 77,373.2
1
Less: Input tax (253,000 x 3/28) 27,107.
14
VAT payable 50,266.
07

7. Domestic sales (1,452,000 x 3/28) 155,571.43

Export sales (1,815,000 x 0%) - .
Output tax 155,571.43

68
 Less: Input tax
Purchases – export (422,000 x 3/28) 45,214.2
8
Purchases – domestic (618,200 x 3/28) 66,235.
71
Purchases – supplies (254,100 x 3/28) 27,225.0 138,674.9
0 9
VAT payable 16,896.4
4

8. Actual VAT paid P

365,000
Two percent (2%) of inventory:
Goods for resale P1,350,00
0
Goods manufactured 1,562,00
0
Goods in process of production 616,00
0
Goods purchased for processing 429,00
0
Total 3,957,00
0
Multiply by 2 79,140
%
Transitional input tax (higher) 365,00
0
9. Total purchases of sugar cane P1,000,00
0
Portion produced into refined sugar:
White sugar 60%
Bagasse 5% ____65
%
Purchases produced into refined sugar & 650,0
bagasse 00
Rate 4
%
Presumptive input tax 26,0
00

Output tax (2,000,000 x 12%) 240,000

Less: Input tax
On purchases 35,000
Presumptive input tax 26,000 61,000
VAT payable 179,000

Notes:
1. Raw sugars are not subject to presumptive input taxes because they are exempt
from value-added tax.
2. Bagasse is subject to presumptive input tax because it is not included in the
exemption from VAT under Revenue Regulation 16-2005.

10. Output tax (P1,100,000 x 3/28) 117,857.1

4

69
 Less: Input tax
Purchases, VAT (440,000 x 3/28)
47,142.86
Purchases, VAT & Non-VAT (9,900 x 3/28) 1,060.71
Allocation based on sales:
Sales, VAT P 1,000,000
Sales, Non-VAT 500,000
Total 1,500,000
(1,000,000/1,500,000 x 1,060.71) 707.14 46,435.7
2
VAT payable 71,421.
42
11. Output tax - sale of school supplies (400,000 x 12%) P48,000.0
0
Less: Allocated Input tax
Input tax on computer (44,000 x 3/28) P
4,714.29
Taxable sales 400,000
Exempt sales 600,000
Total 1,000,000
(4,714.29 x 400/1,000 ) 1,885.7
2
VAT payable
46,114.2
8
12. January
Output tax 60,000
Less: Input taxes
On purchases 30,000
On machinery (2,000,000 x 12%) / 60 4,000 34,000
VAT payable 26,000
February
Output tax 65,420
Less: Input taxes
On purchases 38,730
On machinery (2,000,000 x 12%) / 60 4,000 42,730
VAT payable 22,690

13. Output tax (700,000 x 12%) 84,000

Less: Input taxes
Purchases (500,000 x 12%) 60,000
Machinery (1,500,000 x12%)/60 x 2 6,000
Unutilized input tax 40,000 106,000
Excess input tax (22,000)

Output tax (1,500,000 x 12%) 180,000

Less: Input taxes
Purchases (200,000 x 12%) 24,000
Excess tax carry over 22,000
Machinery (3,000 x 3) 9,000 55,000
VAT payable 125,000

14. Supplier of goods:

70
 Selling price 1,000
Less: Output tax (1,000 x 12%) 120
Invoice amount 1,120
Less: 5% withholding of final VAT (1,000 x 50
5%)
1% withholding of income tax (1,000 x 10 60
1%)
Amount payable to supplier of goods 1,060

Supplier of services:
Selling price 5,000
Less: Output tax (5,000 x 12%) 600
Invoice amount 5,600
Less: 5% withholding of final VAT (5,000 x 250
5%)
2% withholding of income tax (1,000 x 100 350
2%)
Amount payable to supplier of goods 5,250

15. Actual collection (exclusive of the VAT)

X Zonal value x 12 %
Agreed consideration (exclusive of the VAT)
10,000
X 1,500,000 x 12% = 1,800
1,000,000

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