Fitero B.

Garlitos
2017-E905019

INCOME TAXATION

Problem 4-3 Multiple Choice

Select the letter that contains the best answer.

1. Which of the following income is/are earned through employee- employer

relationship?
i. Professional fee
ii. Wages
iii. Pension pay
iv. Capital gain

Choices:

a. i, ii, iii only c. ii and iii only

b. I and ii only d. ii only
2. Which of the following is taxable compensation income?
a. Retirement pay under BIR approved retirement plan
b. Separation pay due to disability
c. Separation pay due to resignation
d. Terminal pay by fact of death
3. Statement 1: All vacation leave and sick leave taken with pay are taxable
compensation income.
Statement 2: all unused vacation leave converted to cash are taxable.
a. Both statements are correct.
b. Only statement 1 is correct.
c. Only statement 2 is correct.
d. Both statements are incorrect.
4. Which of the following is taxable compensation income?
a. Transportation allowance paid to rank and file employee
b. Social security system benefits.
c. Retirement pay due to BIR approved benefit plan.
d. Retrenchment pay.
5. Which of the following is not taxable?
a. P2,500 for 10 days sick leaves actually taken
b. P1,250 for 5 days unused vacation leave converted in to cash
c. P1, 000 for unused vacation leave received as part of separation pay due to
voluntary resignation.
d. P500 vacation leave included as part of salary not withstanding his absence.
Fitero B. Garlitos
2017-E905019

6. Which of the following is taxable compensation income?

a. Cost of living allowance.
b. De minimis benefits
c. Retirement benefit under BIR approved retirement plan
d. Retrenchment pay
7. Compensation income is earned when an employer- employee relationship exists.
Which of the following represents taxable compensation income?
a. Honorarium of the company lawyer as guest speaker in company sponsored
seminar
b. Emergency pay
c. Sick leave with pay
d. All of the above.
8. Which of the following will result to earning of income by the debtor?
a. Cancellation of existing payables without any financial consideration
b. Cancellation of existing payables for services rendered to creditor
c. Cancellation of existing payable to offset the equivalent amount of collectible
d. Cancelation of existing payable due to bankruptcy of the debtor
9. Which of the following is not a compensation income?
a. Retirement pay c. wages
b. Allowances d. professional fees
10. Which of the following is income to the recipient?
a. Stock option c. pre- emptive stock right
b. Stock dividend d. stock warrant
11. Statement 1: remuneration for casual labor not in the normal course of business
is not considered compensation.
Statement 2: remuneration for casual labor performed for a corporation is
considered as compensation?
a. Only statement 1 is correct
b. Only statement 2 is correct.
c. Both statement are correct
d. Both statement are incorrect
Fitero B. Garlitos
2017-E905019

INCOME TAXATION

PROBLEM 4- 4 MULTIPLE CHOICE

Select the letter that contains the best answer.

1. Cost services may be defined as

a. Cost of services to provide services
b. Cost of facilities directly utilized to provide services.
c. All direct costs and expenses necessary to provide services.
d. No cost involved in providing services.
2. All of the following are income within, except
a. Dividends declared by domestic corporations.
b. Salaries earned by Filipino overseas contract workers.
c. Interest on bonds issued by domestic corporations.
d. Income from business located in the Philippines
3. What is the final tax rate or interest income earned from a regular savings
deposit?
a. 5% c. 20%
b. 10% d. 25%
4. Mrs. Gemmarie Parong is a mining operator. Her mineral lands are not
covered by any lease contract. The tax Mrs. Parong has to pay based on
the actual market value of the gross output or mineral products extracted
is
a. Excise tax c. rental
b. Royalties d. 3d- valorem tax
5. Insurance premium paid by employer in favor of the insured employee and
designate the business of the employer as the beneficiary.
Statement 1: the payment of insurance premium is taxable income of the
employee.
Statement 2: the payment of insurance premium is deductible expense of
the employer.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
Fitero B. Garlitos
2017-E905019

6. The following are related items to the operation of a single proprietorship

business:
i. Purchases of goods for sale
ii. Freight in of goods purchased
iii. Sale of good
iv. Freight out of goods sold
v. Unsold goods at the end of the period

Which of the above items are elements of cost of sales?

a. I, ii, iv and v c. I, ii and iv only

b. I, ii, iv and v only d. I, ii and v only
7. Statement 1: property dividends received by individual from domestic
corporations are subject to final withholding tax.
Statement 2: cash dividend received by a resident corporation from
another foreign corporation not doing business in the Philippines is subject
to final withholding tax of 35% without reciprocity.
a. Both statements are correct.
b. Only statement 1 is correct.
c. Only statement 2 is correct.
d. Both statements are incorrect.
8. Which of the following is subject to 10% final tax?
a. Interest income from savings account
b. Royalty income from franchise
c. Royalty income from patent
d. Royalty income from literary works
9. Which of the following dividends are subject to income tax?
a. Received by domestic corporation from another domestic corporation
b. Received by a resident corporation from a domestic corporation
c. Received by domestic from foreign corporation
d. Received by non- resident foreign corporation from another non-
resident foreign corporation
10. Statement 1: generally, prizes and winnings are taxable income.
Statement 2: prizes less than P10,000 are taxable the same manner as
business income.
a. Both statements are correct
b. Only statement 1 is correct
c. Only statement 2 is correct
d. Both statements are incorrect
Fitero B. Garlitos
2017-E905019