51. KAMI-NA Eatery Corporation provides 20% discount to senior citizens.
It recorded the following
during the year:
Transactions
Customer
Totals
Regular Senior Citizen
receipts (net) Php 8,000,000 Php 2,000,000 Php 10,000,000
Cost of Services 6,000,000
Other Deductible expenses 2,000,000
The regular and special itemized deduction from gross income is
a.Php 2,500,000 b. Php 2,400,000 c. Php 2,000,000 d. Php 1,600,000
52. Using the above data, the taxable net income is
a.Php 1,600,000 b. Php 2,000,000 c. Php 1,500,000 d. Php 1,000,000
53. To improve productivity, MAY-FOREVER-NA Corporation negotiated a productivity incentive program
wherein
the employees will receive productivity bonus equivalent to 40% of production cost savings measured by
an
independent expert. MAY-FOREVER-NA requires employees to undergo studies through an “employee
advancement study program” with TESDA. All employees who finished their special studies are required
to
remain at MAY-FOREVER-NA for a period of at least 2 years. The following were determined during the
year:
Cost of special studies:
Managerial employees Php 2,000,000
Rank & File employees 4,000,000
Total distributable productivity bonus 2,000,000
Total Php 8,000,000
The allowable deduction for the benefits given is
a.Php 8,000,000 b. Php 9,000,000 c. Php 10,000,000 d. Php 11,000,000
Principles
54. Statement 1 : Deductions are items or amounts allowed to be subtracted from gross income to
arrive at the
taxable income.
Statement 2 : Exclusions are receipts which are excluded from the gross, hence, do not form part of the
gross income.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statement are incorrect
55. Which of the following is not a characteristic of a deduction?
a. It is reduction of wealth that helped earn the income subject to tax.
b. An immunity or privilege, a freedom from a charge or burden to which others are subjected.
c. It is not a receipt.
d. It is subtraction to arrive at incomes subject to tax.
“B” refers to “exclusions”, not deductions
56. Political campaign contributions are not deductible from the gross income.
a. If they are not reported to the Commission on Elections.
b. If the candidates supported wins the election because of possible corruption.
c. Since they do not help earn the income from which they are to be deducted.
d. Since such amounts are not considered as income of the candidate to whom give.
Refer also to letter “a” of No. 2
57. Statement 1 : Deductions from gross income are not presumed.
Statement 2 : As rule, deductions means itemized deductions
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are in correct
/etd
58. Statement 1 : Revenue expenditures are period costs that are related to a particular period of time
of business
operation.
Statement 2 : Capital expenditures are non-recurring expenditures related to acquisition of depreciable
assets to be
used in the business.
a. Treated as business rental, hence deductible
b. Treated as capital expenditure, hence not deductible
c. Treated as depreciate expense, hence deductible
d. Treated as ordinary business expense.
Pro-form Journal Entries:
Upon acquisition:
Equipment Pxx
Accounts Pxx
Installment payment:
Accounts Payable Pxx
Cash Pxx
59. Statement 1 : A taxpayer can only deduct on item or amount from gross income only if there is a law
authorizing
such a deduction.
Statement 2 : For income tax purposes, a taxpayer is free to deduct from the gross income the full
amount of the
deduction allowed, or a lesser amount or not to claim any deduction at all.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
60. In cases of deductions and exemptions on income tax returns, doubts shall be resolved.
a. Strictly against the taxpayer
b. Strictly against the government
c. Liberally in favor of the taxpayer
d. Liberally in favor of the employer
