84. Mike leased his land to Leomar for two years beginning July 1, 2018.
Leomar would pay monthly
rental of
P100,000. He paid rent up to October 2018 and then defaulted for the rest of the year. Under accrual
method,
how much was the income of Mike for 2018?
a. P200,000
b. P400,000
c. P600,000
d. None of the choices
Based on collections, regardless of accounting method used.
85. Using the same data in the preceding number, under cash method, how much was the income of
Mike in 2014?
a. P200,000
b. P400,000
c. P600,000
d. None of the choices
86. Under accrual method, how much was the deductible expense of Leomar in 2018?
a. P600,000
b. P400,000
c. P200,000
d. None of the choices
87. Under cash method, how much was the deductible expense of Leomar in 2041?
a. P600,000
b. P400,000
c. P200,000
d. None of the choices
B
88. Pedro leased his lot to Jose. The contact calls for Jose to construct a house which would serve as a
residence of
the latter, the ownership thereof to be transferred to Pedro after the expiration of the lease. When the
house was
completely constructed, the remaining term of the lease was 10 years. The residential house had an
estimated
useful life of 15 years. What is the tax implication of the leasehold improvement?
a. Pedro derives taxable income on the improvement; Jose can claim depreciation expense as a
deduction from the gross
income.
b. Pedro derives taxable income on the improvement; Jose cannot claim depreciation expense as a
deduction from the
gross income.
c. Pedro does not derive taxable income on the improvement; Jose cannot claim depreciation expense
as a deduction
from the gross income.
d. Pedro does not derive taxable income on the improvement; Jose can claim depreciation expense as a
deduction from
the gross income.
/etd
Jose cannot claim depreciate expense because of the point of view of Jose , the improvement is a
personal asset
(pertaining to his house), therefore, any depreciate in relation to the improvement is non-deductible.
Pedro will derive an income because the ownership of the property will be transferred to him upon
expiration of
the lease term.
89. Assume the same facts in the immediately preceding number, except that at the time of the
completion of the
residential house, the remaining term of the lease was 15 years while the useful of the house was 10
years. What
is the tax implication of the leasehold improvement?
a. Pedro derives taxable income on the improvement; Jose can claim depreciation expense as a
deduction from the gross
income.
b. Pedro derives taxable income on the improvement; Jose cannot claim depreciation expense as a
deduction from the
gross income.
c. Pedro does not derive taxable income on the improvement; Jose cannot claim depreciation expense
as a deduction
from the gross income.
d. Pedro does not derive taxable income on the improvement; Jose can claim depreciation expense as a
deduction from
the gross income.
Jose cannot claim depreciate expense because of the point of view of Jose, the improvement is a
personal asset
(pertaining to his house), therefore, any depreciate in relation to the improvement is non-deductible.
Pedro will not derive an income because the useful life of the improvement is shorter than the lease
term. Thereof
, upon termination of the lease, there is no more improvement to be transferred to Pedro.
