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TAXATION
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3. All of the following except one is allowed presumptive input tax. Which one?
a. Processor of sardines and mackerel.
b. Manufacturer of refined sugar and cooking oil.
c. Manufacturer of packed noodle-based instant meals.
d. Processor of milk and coffee.
4. Which of the following input taxes can be refunded, converted into tax credit certificate or carried over to
the next quarter at the option of the VAT-registered taxpayer?
a. Input tax on purchase of raw materials.
b. Input tax on importation of supplies.
c. Input tax on zero-rated sales of goods or services.
d. Input tax on purchase of services.
6. The VAT shall apply to goods or properties originally intended for sale or use in business, and capital
goods which are existing as of the occurrence of one of the following:
a. Change of business activity from VAT taxable status to VAT-exempt status;
b. Change of control of a corporation by the acquisition of the controlling interest of such corporation by another
stockholder or group of stockholders;
c. Change in the trade or corporate name of the business;
d. Merger or consolidation of corporation.
7. 1st Statement: The input value-added-tax on purchase of capital goods valued at P1,000,000 shall be spread
over 60 months of the life of property is equivalent to 5 years or more.
2nd Statement: The input value-added-tax on purchase of capital goods valued at P1,000,000 shall be spread
over the life of property if the life of property is less than 5 years.
a. True, true c. False, false
b. True, false d. False, true
12. Denver Corporation has the following sales (inclusive of VAT) during the month:
Sale to private entities 224,000.00
Sale to export-oriented enterprise 100,000.00
Sale of exempt goods 100,000.00
The following input taxes were passed on by its VAT suppliers during the month:
Input tax on taxable goods 5,000.00
Input tax on zero-rated sales 3,000.00
Input tax on sale of exempt goods 2,000.00
Input tax on depreciable capital good not
attributable to any specific activity 20,000.00
13. During the month of September 2006, XYZ Corporation had domestic sales amounting to P1,680,000 and
export sales amounting to P1,500,000. during the same month, XYZ’s total purchases directly attributable to domestic
sales amounted to P1,120,000 and total purchases directly attributable to export sales P1,008,000.
For the month of May, XYZ corporation’s VAT payable:
a. (48,000.00) c. 60,000.00
b. 54,000.00 d. 62,000.00
14. 1st Statement: The gross estate of a Filipino residing in the USA shall be composed of properties situated in the
Philippines only.
2nd Statement: The gross estate of an American residing in the Philippines shall be composed of properties
situated in the Philippines excluding intangible personal properties if there is reciprocity.
15. Mr. Pacman donated a parcel of land to his brother. Which of the following statements is CORRECT in
connection with this particular donation?
a. The donation can be made orally when the value is less than P5,000;
b. The donation shall be made in public instrument and the acceptance of the donation may be done orally;
c. The donation shall be made in public instrument and the acceptance shall be made in another public
instrument to be noted in both instruments;
d. The acceptance of the donation may be made by the donee in the same Deed of Donation which may be
done even after the death of the donor.
16. The following taxes, fees and charges are deemed to be national internal revenue taxes, except:
a. Documentary stamp taxes c. Excise taxes
b. Community taxes d. Income taxes
17. Royal Mining is a VAT-registered domestic mining entity. One of its products is silver being sold to the
Bangko Sentral ng Pilipinas. It filed a claim with the BIR for tax refund on the ground that under Section 106 of the
Tax Code, such sale is?
a. Subject to 12% VATABLE transactions.
b. Subject to zero-rated transactions.
c. Is an exempt sale.
d. Is classified as effective zero-rated transaction.
18. A decedent died single, leaving a family home which consists of a piece of land that he inherited 3 – ½
years ago (with a value at the time of P600,000) with a fair value of P800,000 at the time of his death, and a house
thereon which he built at a cost of P650,000, and a fair market value at the time of his death of P450,000. Other
properties in his gross estate have a fair market value if P550,000. Unpaid obligations at the time of his death
amounted to P300,000.
The vanishing deduction is:
a. 200,000 c. 40,000
b. 500,000 d. 225,000
21. Charlie, a widower, has two sons by his previous marriage. Charlie lives with Jill who is legally married to
Mario. They have a child named Jane. The children are all minors and not gainfully employed. One of the son lives
in a dormitory and the other has a child. How much is total personal exemptions can Charlie and Jill claim?
a. Charlie P20,000; Jill P25,000 c. Charlie P41,000; Jill P40,000
b. Charlie P33,000; Jill P33,000 d. Charlie P48,000; Jill P32,000
22. One of the following is a head of family for income tax purposes:
a. Widower supporting a senior citizen who is not related to him;
b. Unmarried taxpayer supporting his brother, 25 years old;
c. Married but legally separated taxpayer supporting a niece, 16 years old;
d. Single taxpayer supporting his live-in partner who is unemployed.
23. Situation 1: Mr. A, in trading business, had a receivable of P150,000 from Mr. B. Without exerting utmost
effort to collect, Mr. A cancelled the indebtedness of Mr. B.
Situation 2: Mr. C sold to Mr. D personal property worth P200,000 for a consideration of P50,000, to take
effect immediately upon receipt of the consideration.
Which statement is correct?
a. Situation 1 involves a donation of P150,000 and should be covered by a donor’s tax return within 30 days from
the date of cancellation of the indebtedness;
b. Situation 1 is a bad debt expense of the business and should not be treated as involving a taxable donation;
c. Situation 2 shall be considered a bad bargain and not involving taxable donation;
d. Situation 2 involves a donation of P200,000 and should be covered by a donor’s tax return within 30 days from
the date of cancellation of the indebtedness.
24. Which of the following conditions is not necessary for retirement benefits to be exempted from income
tax?
a. The retiring official or employee has been in the service of the same employer for at least ten (10) years.
b. The benefits granted shall be availed of by an official or employee only once.
c. The retiring employee is not less than fifty years of age.
d. The employee is the sole bread winner of the family.
25. Which of the following statements is not correct about the Minimum Corporate Income Tax (MCIT)?
a. Minimum Corporate Income Tax is equivalent to 2% of the gross income beginning on the fourth taxable year
immediately following the year in which such corporation commenced its business operation.
b. It is imposed only where 2% of the gross income is more than the normal income tax.
c. The excess of MCIT over the normal income tax shall be carried forward and credited against the normal
income tax for the three (3) immediately succeeding years.
d. The MCIT may be applied either on an annual or quarterly basis.
26. The net operating loss of the business or enterprise for any taxable year immediately preceding the current
taxable year, which had not been previously offset as deduction from gross income shall:
a. Be carried over as a deduction from gross income for the next three (3) consecutive taxable years immediately
following the year of such loss.
b. Be carried over as a deduction from gross income for the next five (5) consecutive taxable years immediately
following the year of such loss.
c. Not be carried over as a deduction from gross income in any of the succeeding years.
d. Be carried over as a deduction from gross income in any of the succeeding year until it is fully offset.
27. Because of dire necessity, Mr. Den sold a parcel of land from Ilocos for P8,000,000 with a cost of
P10,000,000. The fair market value of the land was P11,000,000. The proceeds of the sale were used to purchase
principal residence at Manila.
The sale of land resulted a tax consequence of:
a. P480,000 capital gains tax on sale of real property.
b. P600,000 capital gains tax on sale of real property.
c. P660,000 capital gains tax on sale of real property.
d. None. The said transaction is exempt from the CGT.
29. Mr. Araki, a non-resident alien stockholder, received a dividend income of P300,000 in 2005 from a
foreign corporation doing business in the Philippines for three years preceding 2005 are as follows:
Source of income 2002 2003 2004
From within the Philippines P16,000,000 P12,000,000 P14,000,000
From without the Philippines 18,000,000 14,000,000 16,000,000
How much of the dividend income received by Mr. Araki is considered income from sources within the Philippines,
a. Zero c. P300,000
b. P150,000 d. P270,000
32. Video Rentals, Inc., an accrual – basis taxpayer, reported recent receivable of P70,000 and P50,000 in its
2007 and 2006 balance sheet, respectively. During 2007, Video received P100,000 in rent deposits. In Video’s 2007
income tax return, what amount should Video include as rent revenue?
a. P130,000 c. P120,000
b. P110,000 d. P100,000
33 to 35 are based on the following: During the month of February 2006, Princess Trading realized sales of P990,000,
VAT exclusive. The owner took goods with a selling price of P50,000 (VAT exclusive) costing P40,000 for personal use.
During the same month, the company also sold goods worth P300,000 to the Asian Development Bank. The company had
an approved zero-rating from the BIR.
There was also purchases of goods for sale to private customers amounting to P336,000, VAT inclusive; office supplies for
use in the business, P30,000 VAT exclusive and purchase of services amounting to P11,000, VAT exclusive. The services
had not been paid yet.
36. Budoy Corporation, a domestic merchandising corporation shows its three-year operation. The company
started in 2002.
2004 2005 2006
Gross income for the year P1,000,000 P1,200,000 P1,500,000
Less: Allowable deduction for the year 950,000 1,350,000 1,250,000
Net taxable income (loss) for the year P 50,000 P (150,000) P 250,000
37. BORGOY acquired his old principal residence in 1992 at a cost of P4M. He sold the said property on
January 1, 2004 for P16M, although the FMV on that date was P20M. Within the reglementary period BORGOY
acquired his new principal residence for P12M. Which of the following is incorrect?
a. BORGOY has to pay capital gains tax of P300,000.
b. The cost basis for the new principal residence is P5M.
c. The unutilized amount of the gross selling price is P4M.
d. If the proceeds were not used to buy a new principal residence, the capital gains tax should have been P1.2M
38. Under RA 9337, all of the following are exempt from VAT, except one:
a. Sale by the artist himself of his works of art.
b. Sale of goods other than those mentioned in paragraphs A to Y and AA to CC of section 109 of the Tax Code where
the annual gross receipts does not exceed P1,500,000.
c. Lease of residential unit with monthly rental of P8,000.
d. Sale of agricultural and marine food product in its original state.
Mr. Cute, single, received the following income in the year 2000:
(1) Dividend income, domestic corp. P 40,000
(2) Lotto winning in the Philippines 200,000
(3) Lotto winning in the U.S.A. 100,000
(4) Prizes, received in the Philippines 10,000
(5) Interest income from bank deposit in Japan 50,000
(6) Leasehold income, Philippines 100,000
(7) Winnings on gambling from CASINO 300,000
(8) Royalty income as a publisher,
- Philippine Publications 500,000
(9) Royalty income, others – Philippines 60,000
(10) Other business income, Japan 200,000
(11) Other business income, U.S.A. 1,000,000
Income Taxation
Expense paid:
a. Personal P400,000
b. Business, Philippines 300,000
c. Business, Japan 250,000
d. Business, U.S.A. 700,000
Business taxes paid:
a. Philippines (not deductable) P20,000
b. Japan 1,000
c. U.S.A. 105,000
39. Assuming that Mr. Cute is a resident citizen, his taxable income is:
a. P180,000 c. P200,000
b. P190,000 d. P170,000
40. Using the same data, tax due before any credit:
a. P35,000 c. P30,000
b. P25,000 d. P40,000
BUSINESS LAW
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41. A, B, and C are partners contributing services, P20,000 and P40,000 respectively. The distribution of the P80,000 net
assets shall be:
a. A- P20,000 B-P20,000 C-P40,000
b. A- P5,000 B-P25,000 C-P50,000
c. A-P32,000 B-P16,000 C-P32,000
d. A-P26,667 B-P26,667 C-P26,667
43. One or more but less than all the partners have no authority to perform the following except:
a. Renounce a partnership claim
b. Submit a partnership claim or liability to arbitration
c. Convey partnership property in the ordinary course of partnership business
d. Do any act which would make it impossible to carry on the ordinary business of the partnership
44. A limited partnership has A, as general partner, B, as limited partner, and C, as an industrial partner contributing
P50,000; P50,000 and services respectively. The partnership failed and after disposing all its assets to pay partnership
debts there still remains a note payable in the sum of P30,000. Against whom can the creditor demand payment?
a. A-P30,000 B-P0 C-P0
b. A-P15,000 B-P15,000 C-P0
c. A-P15,000 B-P0 C-P15,000
d. A-P10,000 B-P10,000 C-P10,000
45. Statement 1- Any stipulation authorizing the pledgee to appropriate the thing pledged is void and without effect.
Statement 2- If after the auction sale, the thing pledged is not sold, the pledgee can appropriate the
thing pledged.
a. true, true b. false, false c. true, false d. false, true
47. Which of the following corporate acts requires the approval of the majority of the outstanding capital stock or of the
members of the private corporation
a. To invest corporate funds in another corporation or business.
b. To amend the articles of incorporation.
c. To adopt by-laws
d. To dissolve the corporation
48. Except for one, every corporation whose character expires by its own limitation, or annulled by forfeiture or otherwise,
or whose corporate existence for other purpose is terminated in any other manner shall nevertheless be continued as a
body corporate for three years after the time when it would have been dissolved for the purpose of the following. The
exception is
a. Prosecuting and defending suits by or against it and enabling it to settle and close its affairs.
b. To dispose and convey its property
c. To distribute its assets
d. Continuing the business for which it was established
50. The following are the rules in case a managing partner collects a demandable debt from a person who also owes the
partnership a demand debt, except
a. The sum collected shall be applied to the partnership credit
b. It shall be applied to the two credits in proportion to their amounts
c. The sum shall be fully applied to the partnership credit, if the receipt given is for the account of the partnership
d. The debtor has the right to have the payment applied in his debt to the partner if it should be more onerous to him
51. The duty to make disclosure, where otherwise there would be a great and unfair inequality of bargaining position by
the use of inside position as regards relation of directors to stockholders
a. Special circumstances rule
b. Trust fund theory
c. Doctrine of corporate opportunity
d. Incorporate theory
54. A, B, C and D are partners. Their contributions are as follows: A-P50,000; B-P30,000; C- P20,000; and D-services.
The partnership incurred obligations to third persons, which the firm was unable to pay. After exhausting all the assets
of the partnership, there is still an unpaid balance of P10,000. How much should each partner pay to the creditors?
a. A-P5,000 B-P3,000 C-P2,000 D-P0
b. A-P2,500 B-P2,500 C-P2,500 D-P2,500
c. A-P4,000 B-P3,000 C-P2,000 D-P1,500
d. A-P4,000 B-P4,000 C-P2,000 D-P0
55. A, B and C, co-owners of a particular parcel of land, borrowed P75,000 from X and Y. The three (3) debtors signed a
promissory note on January 10, 2006 promising to pay the creditors on or before April 3, 2006. In addition, the debtors
constituted a mortgage on their property in favor of the creditors. On maturity date, X demanded payment. How much
can X collect from C upon maturity of the obligations (creditors are solidary)?
a. P50,000 as it represents the actual share of X in the credit.
b. P25,000 as the obligation is presumed to be joint and the amount represents C’s share in the obligation.
c. P75,000 based on the promissory note
d. P75,000 because the nature of the obligation is solidary
56. Using the preceding number, if C paid X his share in the obligations, can he, as co-owner of the property, seek a partial
release of the mortgage constituted thereon?
a. Yes, because C is answerable only for P25,000
b. Yes, because C’s obligation is already extinguished
c. No, because mortgages are considered indivisible, payment in part shall not extinguish the obligation
d. No, because the obligation is solidary, payment in part shall not extinguish the obligation secured by mortgage
57. The following are considered elements of the contracts of pledge and mortgage. Which is the exception?
a. The pledgor or mortgagor must have the free disposal of the thing pledged or mortgaged
b. The pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged
c. Both are accessory contracts
d. The thing maybe appropriated if the debtor cannot pay
58. P appointed A as his agent orally to sell his parcel of land for P20,000. ten days later, A sold the same property for
P300,000 through a public instrument executed between him and B. What is the effect and status of sale between A and
B?
a. The sale is valid because A was authorized and it was executed in a public instrument.
b. The sale is unenforceable because the agent went beyond the scope of his authority for selling the land for a price
higher than the price agreed upon.
c. The sale is void because there was no valid appointment of A as agent of P.
d. The sale can be ratified although the appointment of A was done orally because the sale between A and B was in a
public instrument.
59. Where a director by virtue of his office, acquired for himself opportunity which belongs to the corporation, thereby
obtaining profits to the prejudice of such corporation, must account to the latter for all such profits by refunding the
same, unless his act is ratified by
a. A vote at a regular or special meeting by stockholders owning or representing a majority of the outstanding capital
stock.
b. A vote of the stockholders owning or representing at lease one-third of the outstanding capital stock
c. A unanimous vote of all the stockholders of the corporation
d. A vote of the stockholders owning or representing at least two-thirds of the outstanding capital stock
60. When a borrower uses the thing for a purpose different from the intended, delays its return to the owner, receives the
thing under appraisal, lends to third person or saves his property instead of the thing in cases of emergency, shall be
liable even in cases of fortuitous events, because
a. The nature of the obligation requires an assumption of risk.
b. The parties have expressly stipulated on such liability.
c. The debtor in delay.
d. The law expressly so provides
62. A delivered to B 10,000 pieces of Davao fabricated shell craft jewelry for the purpose of selling them at P1.00 each.
Out of the proceeds of the expected sale, B is to receive a 10% commission. After 3 days, however, B sold all items at
P1.50 each to C, but on 30-day credit. A compelled B to pay. Which is correct?
a. B must pay P10,000 immediately
b. B cannot be compelled to pay at all
c. B must pay P15,000 immediately
d. B must pay P5,000 immediately and P10,000 after 30 days
63. In real estate mortgage, the mortgagor can sell the mortgaged property
a. With the consent of the mortgagee in writing
b. Even without the consent of the mortgagee
c. Only with the consent of the mortgagee in writing or orally
d. Only after paying his obligation to the mortgagee
64. P wrote a letter authorizing A to sell his parcel of land situated in Boracay. A sold the land in writing to X but the agent
(A) did not give the money to P. The sale of the land by A to X is
a. Void, because the authority of A is not in public instrument.
b. Unenforceable, because the authority of A is not in public instrument.
c. Inexistent, because the authority of A is in private writing.
d. Valid and enforceable
68. Where an indorsement is conditional, may the marker make payment although the condition has not been fulfilled?
a. Yes, he may disregard the condition without incurring any liability.
b. Yes, he may disregard the condition but he becomes liable if the endorsee fails to fulfill the condition
c. No, the qualified indorsement becomes part of the contract
d. No, the person who received payment will hold the proceeds subject to the right of the conditional indorser
69. M issues a promissory note payable to P or bearer. Which of the following is not correct?
a. If indorsed by P to A and A also indorsed it to B, B may negotiates the note to C by mere delivery
b. If indorsed by P to A and A also indorses it to B, P is liable to A and B
c. If indorsed by P to A and A also indorses it to B and B negotiates the note to C by delivery. A is liable to B and C
d. If P negotiates the note to A by delivery and A indorses it to B, B may negotiate the note to C by delivery.
72. A offered to sell his house and lot to B for P1,000,000 giving the latter 30 days to prepare the P1,000,000, and as soon
as B is ready with the money, A will execute the Deed of Sale. On the 15th day, A told B that he has increased the price to
P1, 500,000. Can B compel A to execute the Deed of Sale at the price of P1,000,000?
a) Yes, because there was actually meeting of the minds of the parties.
b) No, because B never signified his acceptance of A’s offer.
c) Yes, because A is already estopped by his offer.
d) No, because P1,000,000 is less than P1,500,000.
73. The following are the qualifications of directors in a corporation. Choose the exception:
74. A, B and C are partners of ABC Partnership sharing profits and losses equally. A is an industrial partner while B and C
contributed P20,000 and P40,000 respectively. The partnership was liquidated and after payment of partnership obligation,
only P90,000 worth of assets remained. The share of A is:
75. A and B are solidary creditors to X and Y, joint debtors for a total sum of P90,000. A owns 1/3 of the credit while B
owns 2/3. But X owes 2/5 of the debt while Y owes 3/5 of the debt. In this case:
76 A guardian of B sold B’ house and lot worth P480,000 for P240,000. This contract can be:
77. X entered into an oral contract with Y for the sale of computer table worth P15,000.00. X delivered the computer but Y
failed to pay the price.
a) this contract is unenforceable because it is not in writing as required by the statute of frauds.
b) this contract is void because there was no consideration paid by Y.
c) this contract is enforceable because it was implemented.
d) this contract is rescissible because of inadequacy of the price.
78. On July 15, 2002, X entered into a contract with Y. On January 10, 2003, X discovered that Y employed fraud to induce
him to enter into the contract, which had he known he would not have entered into. The action for annulment of contract
must be brought:
79. On September 9, 2002, A, B and C Co. Ltd was formed by A as general partner and B and C as limited partners. On
September 9, 2003, A and B got married. Did the marriage dissolve the partnership?
80.The right of the corporation to continue as a juridical entity for the term stated in the articles of incorporation despite the
death of the stockholders:
84. X transferred to Y her parcel of land as payment of his obligation of P1,000,000. What kind of contract entered
between them?
a) Sale b) Lease c) Exchange d) Dation in
Payment
85. The P100,000-bills issued by the Bangko Sentral Ng Pilipinas is an example of:
86. A is obliged to deliver to B his honda civic car or a goats milk taken from a cow or one kilo of shabu or his diamond
ring on September 1, 2003. However A can substitute the prestation with his house and lot. The right of choice belongs to
B. Before the communication of choice, all the prestations except the house and lot, were destroyed by fortuitous event.
What happened to the obligation of A to B?
a) A's obligation is extinguished.
b) A is liable to pay the value of any of the prestation at the choice of B.
c) A's obligation is still subsisting.
d) A is liable to deliver the substitute.
88. ABC Corporation is engaged in investment of funds as shown in its primary purpose. If today, ABC Corporation
decides to invest in XYZ Corporation, what is the voting requirement?
89. A day after the issuance of the certificate of incorporation of XYZ Inc., M, one of the directors discovered that the paid
in capital was only 24% of the subscribed capital stock. Nevertheless, it organized itself and represented to the public as a
corporation. What kind of corporation is XYZ Inc.?
90. A, B and C are partners of ABC Partnership. A resigned from the firm. B, who knew this fact, entered into a transaction
with X who knows of the existence of the partnership but did not know the fact of dissolution. The transaction is not for
winding up nor is it for completion of unfinished business. Who will be liable to X first?
a) ABC Partnership b) A c) B d) C
91. The term which refers to the delivery of a negotiable instrument by the maker or drawer to the payee-holder:
92. X owes ABC Partnership P9,000.00. The partners are composed of A, B and C. X gave to A P3,000 as his share of the
credit. A issued a receipt of his share to X. Few days thereafter, X became insolvent. How should the P3,000.00 be
distributed, if it can be done?
a) A-P3,000, B-0 & C-0 c) A-P1,000, B-P1,000 & C-P1,000
b) A-P2,000, B-P1,000 & C-0 d) A-0, B-P1,500 & C-P1,500
93. A contributed to AB Partnership the usufruct of his car for the firm’s business of car rental. B, a partner, drove the car
from the airport fetching a client but met an accident in the Marcelo B. Fernan bridge totally destroying the car. The client
sustained injuries requiring payment of damages of P100,000. Who should bear the loss of the car?
a) A b) AB Partnership c) B d) client
94. In problem no. 23, supposing the car was the one contributed by A as his capital contribution who should be for
damages of the client?
a) A alone b) AB Partnership alone c) B alone d) A, B & AB Partnership solidarily
95. What is status of the contract of sale over an immovable made by an agent with an unsigned written authority to sell?
97. A induced B not to pay the consideration of the sale of P 1,000,000.00 to C on the ground that the latter is already very
rich. C learnt of the inducement of A and intended to file a case to enforce his right. In case C will recover the price and
damages, to whom shall C recover damages?
98. Jose sold to Pedro ecstacy pills for P1M. A day after the sale, the NBI raided the house of Pedro and recovered all the
ecstacy pills and firearms. Pedro instituted a collection case to recover the P1M. How much can Pedro recover from Jose?
99. The promissory note reads as follows: “We promise to pay to the order of A, B and C the sum of P180,000 payable
within 60 days from issue.” SGD (X, Y and Z). This means that:
100. A stockholder cannot exercise his pre-emptive right on any of the following situation, which is the exception:
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