PART II

Answer Key
 VALUE ADDED TAX
1. A 14. B
2. C 15. C
3. A 16. D
4. C 17. B
5. C 18. B
6. B 19. C
7. C 20. B
8. C 21. A
9. B 22. C
10. B 23. A
11. D 24. A
12. D 25. D
13. B

Solution:

20. Sales 1,900,000

Purchase of goods 1,260,000
VAT Base 640,000
Multiply 12%
VAT Due, Before Input Tax on Capital Goods 76,800
Input Tax on Capital Goods [(1,440,000 x 12%) /60mos.] 2,880
VAT DUE B. 73,920

21. Sales 2,800,000

Purchase of goods 1,600,000
VAT Base 1,200,000
Multiply 12%
VAT Due, Before Input Tax on Capital Goods 144,000
Input Tax on Capital Goods [(900,000 x 12%) /36mos.]3,000
VAT DUE A.141,000

22. Sales 1,900,000

Purchase of goods 1,260,000
VAT Base 640,000
Multiply 12%
VAT Due, Before Input Tax on Capital Goods 76,800
Input Tax on Capital Goods [(1,440,000 x 12%) /48mos.]3,600
VAT DUE C.73,200

23. Sales P 200,000 Output Tax 24,000

Purchases:
Fresh Fruits 30,000
Raw sugarcane 12,000
Tin Can, gross of VAT 12,320 Input Tax (1,320)
Paper Labels, net of VAT 5,000 Input Tax (600)
Cardboard for boxes, net of VAT 8,000 Input Tax (960)
Freight, gross of VAT (50% still unpaid) 10,080 Input Tax (540)
VAT PAYABLE A. 20,580

24. Local sales to private entities 1,500,000

Export Sales 500,000
Local sales to government 800,000
Total VATABLE SALES A.2,800,000
25. Sales, gross of VAT P 784,000
Output Tax 84,000
Purchases of Corn & Coconut (330,000 x 4%) (13,000)
Purchases from VAT suppliers, VAT included:
Packaging Materials 56,000
Supplies 16,800 72,000 x3/28 (7,800)
VAT PAYABLE D. 63,000

OTHER PERCENTAGE TAX

1. C 6. C
2. D 7. B
3. C 8. B
4. A 9. A
5. C 10. B
Solution:

6. Gross receipts, transport of passenger P500,000

7. Gross receipts, transport of goods and cargoes P 1,000,000

8. Gross receipts (1 Million x 60%) P 600,000

Tax rate 2%
Franchise tax 12,000

9. Total amount paid (1 Million x 50%) P 500,000

Tax rate 10%
Overseas communication tax 50,000

10. Gross receipts P 1,000,000

Tax rate 18%
Amusement tax 180,000

ESTATE TAX
1. A 6. A
2. D 7. B
3. C 8. B
4. D 9. B
5. C 10. A

Solution:
10. House and lot in the Philippines (mortgaged for P300,000) 1,250,000
Condominium unit in Hongkong 1,000,000
Car in Philippines 70,000
Car in Hongkong 60,000
Franchise exercised in the Philippines 300,000
Franchise exercised in New York, USA 25,000
Domestic shares, certificate kept in New York, USA 55,000
Foreign shares, 90% of business in the Philippines 60,000
Foreign shares, 30% of business in the Philippines,
with business situs in the Philippines 15,000
Foreign shares, 60% of business in the Philippines 75,000
Gross Estate A. 2,910,000
 DONOR’S TAX
1. B
The prize is not subject to donor’s tax because it does not met
the requisites of donations. However it is subject to income tax
or imposed a final tax of ten percent (10%) because it exceeds
Ten thousand pesos (P10,000).

2. B
The followings are essentials or requisites of donations for the
purpose of donor’s tax:
a) Capacity of the Donor
- refers to the conditions and legal competence of the
donor to enter into a valid contract
- the donor must be capacitated (not necessary for
donee)

b) Donative Intent
The declaration of the transfer of ownership by the owner
without consideration

c) Delivery of the Gift

can be actual or constructive
- Completion of the gift requires physical delivery or
delivery of the instrument
- Donor’ tax does not apply until there is a completed
gift (no reservation over the gift)
-
d) Acceptance of the Gift
- Acknowledgement of the thing donated
- It is perfected from the moment the donor has known
the acceptance by the donee and completed by the
delivery

3. C

4. A
5. D
Solution:
4. Land , California P250,000
Land and building in Sulu 175,000
Car, California 225,000
Jewelries in the Philippines 45,000
Share of stocks, USA 60,000
Accounts receivable, Philippines 25,000
Gross gift A. 780,000
5. Land and building , Sulu 175,000
Jewelries, Philippines 45,000
Gross gift D. 220,000

LOCAL BUSINESS TAX

1. D
 2. A
3. D
4. D
5. D

TARIFF AND CUSTOM TAX

1. B
2. D
3. B
4. A
5. C

Solution:
3. Invoice value 2,000,000
Other cost incurred to bring the goods to Philippine port 70,000
Total cost 2,070,000
Custom duties rate 10%
Customs duties on dutiable value B. 207,000

4. Cost price of imported goods 900,000

Add: Insurance premiums 125,000
Freight charges 135,000
Dutiable Cost A. 1,160,000

5. Cost price of imported goods 900,000

Add: Insurance premiums 125,000
Freight charges 135,000
Dutiable Cost 1,160,000
Add: Customs duties 600,000
Wharfage fee 20,000
Arrastre fees 30,000
Internal processing fee 40,000
Customs brokerage fee 80,000
Documentary stamp tax 60,000
Interest and other bank charges 90,000
Warehouse and storage fees 100,000
Excise tax 120,000 1,140,000
Landed cost C. 2,300,000

PREFERENTIAL TAX
1. C 6. B
2. C 7. D
3. D 8. B
4. C 9. D
5. D 10. C
Solution:
3. Cost of medical operation 500,000
Less: 20% discount 100,000
5% discount 25,000 125,000
Amount payable by Pedro D. 375,000

4. 20% SCs discount (500,000 x 20%) 100,000

5% discount – 25th year celebration (500,000 x 5%) 25,000
Deduction from gross income C. 125,000