True or False

1. Traders who imports wheat shall pay advanced VAT. FALSE

2. The importation of sugar cane is subject to advanced input VAT. TRUE
3. A manufacturer of refined sugar pay advanced VAT before pulling out the refined sugar at the
point of production. TRUE
4. Millers who imports wheat shall pay advanced VAT. FALSE
5. The owner of naturally grown timber shall pay advanced VAT prior to its transport to buyers.
TRUE
6. Traders of refined sugar and flour shall pay advanced VAT. FALSE
7. Millers of refined sugar and flour shall pay advanced VAT. TRUE
8. A non-VAT person who transport for sale naturally grown timber shall pay advanced percentage
tax in lieu of the VAT. TRUE
9. Unclaimed advanced VAT may be claimed as tax credit. TRUE
10. Unutilized advanced VAT may be claimed as tax refund. FALSE
11. Unutilized advanced VAT may only be claimed as tax credit certificate. FALSE
12. Unutilized input VAT can be refunded upon termination of the business of the taxpayer. TRUE
13. A VAT overpayment can be carried over in the following periods. FALSE
14. Advanced VAT is an input VAT. FALSE
15. The quarterly VAT due of the taxpayer is paid within 20 days following the end of the quarter.
TRUE

Multiple Choice- Theory

1. Which is not subject to payment of advance input of VAT?

a. Milk
b. Refined sugar
c. Flour
d. Timber
2. Which is correct statement regarding the advanced input VAT?
a. The advanced input VAT is synonymous to the VAT on importation.
b. The advanced input VAT is the final VAT due from the seller.
c. The advanced input VAT is a down payment to the VAT on the ultimate sale of refined sugar,
flour or timber.
d. The advanced input VAT is in lieu of the actual input VAT traceable to the sales of refined
sugar, flour or timber.
3. Which of the following tax credit can be claimed through a tax credit certificate?
a. Input VAT on export sales
b. Advance input VAT
c. Input VAT on sales to the government
d. A and B
4. Which of the following is not subject to the requirement to pay advanced VAT?
a. Wheat traders
b. Millers of flour
c. Sugar refineries which processes sugar for its own account
d. Owners of harvested timber
5. Which of the following can be claimed as VAT refund?
 a. Input VAT on export sales
b. Advanced input VAT
c. Input VAT on sales to the government
d. A and B
6. Which is not a tax credit against net VAT payable?
a. Advanced VAT
b. Monthly VAT payments
c. Standard Input VAT
d. Final withheld VAT
7. Which is not a VAT compliance requirement?
a. VAT invoicing
b. Transactional recording
c. Filling of monthly summary list
d. None of these
8. The summary list is required for
a. Large taxpayer
b. Non-large taxpayer
c. Non-VAT taxpayers
d. All VAT taxpayer
9. Which industry is not subject t VAT?
a. Mining
b. Construction
c. Banking
d. Air transport
10. What is the effectivity of the request for cancellation of VAT registration?
a. On the day of request is approved
b. On the day following the date the request was approved
c. On the following month the cancellation was approved
d. On the quarter following the quarter when the cancellation was approved

Multiple Choice- Problems: Part 1

1. Sabina Flour Milling (SFM) Corporation imports and mills wheat for the domestic market. During
the month, it imported wheat at a total landed cost of P 3,000,000. The same was milled and
yielded 2,000 sacks of flour. 1,200 sacks was sold at a price of 2,400 per sack.

What is the advanced VAT to be paid by SFM upon importation of the wheat?
a. P 0 c. P 360,000
b. P 288,000 d. P 460,000
SOLUTION:
Advanced VAT = (1,200 x 2,400) x 10%
= P 288,000

2. Sugar Nanay Corporation (SNC) buys sugar cane from farmers and processes them into refined
sugars. During a month, SNC made the following purchases:

Purchase of cane sugar P 1,800,000

 Other supplies, excluding VAT P 300,000
Other expenses, including VAT P 112,000

A total of 2,000 bags were produced. 1,500 were sold at a price of P 1,600 per bag in the same
month.
SNC paid the advanced VAT on the production in accordance with the BIR’s prescribed new base
price for refined sugar.

What is the advanced VAT?

a. P 204,000 c. P 288,000
b. P 216,000 d. P 336,000
SOLUTION:

3. In the immediately preceding problem, what is the total credit against output VAT (including the
advanced VAT) for the month?
a. P 318,000 c. P 456,000
b. P 324,000 d. P 480,000
4. A VAT-taxpayer had the following data on its VAT obligation at the last quarter of the year:
Output VAT on regular sales P 150,000
Input VAT on regular sales 120,000
Advanced input VAT 70,000
Advanced input VAT claimed as tax credit 40,000
VAT paid in the prior months 40,000

What is the input VAT carry-over for the following quarter?

a. P 0 c. P 50,000
b. P 40,000 d. P 80,000
SOLUTION:
VAT paid in the prior months is 40,000

5. Mr. Esperon, a VAT registered person, had the following transactions during the month:

Sales to non-VAT persons, VAT exclusive P 400,000

Sales to VAT persons, VAT exclusive 500,000
Purchases from VAT persons, VAT exclusive 200,000
Purchases from non-VAT persons 100,000

Compute the VAT payable.

a. P 84,000 c. P 36,000
b. P 72,000 d. P 24,000

SOLUTION:
VAT Payable = (500,000+200,000) x 12%
= P 84,000
6. Ms. Chelsea had the following transactions in June 2014:

Sale of VAT-exempt goods P 200,000

 Sale of vatable goods 400,000
Purchase of VAT-exempt goods 120,000
Purchase of vatable goods 250,000
All figures are exclusive of VAT. Compute the VAT payable.
a. P 42,000 c. P 21,000
b. P 27,600 d. P 18,000

SOLUTION:

VAT Payable = (400,000-250,000) x 12%

= P 18,000

7. The following gross receipts and input VAT relates to a non-profit and non-stock charitable
institution in the month:

Contributions from the public P 8,000,000

Government grant 1,000,000
Sales of gift shop items 900,000
Rental of vacant premises 1,000,000

Input VAT related to shop and rental operations P 112,000

Input VAT related to non-profit operations 428,000
What is the VAT payable?
a. P 0 c. P 768,000
b. P 116,000 d. P 840,000
SOLUTION:
VAT Payable = [(900,000+1,000,000) x 12%] – 112,000
= P 116,000
8. A seller of goods reported the following in the month:

Cash sales P 450,000

Credit sales (40% collected) 650,000
Installment sales (30% collected) 400,000
Total sales, exclusive of VAT P 1,500,000

Purchases of goods, VAT inclusive P 448,000

Purchases of equipment, VAT inclusive 1,008,000

What is the VAT payable?

a. P 132,000 c. P 24,000
b. P 130,200 d. P 0

SOLUTION:

VAT Payable = [(1,500,000 x 12%) – (448,000+1,008,000) x 12%]

= P 24,000
9. The net income of Aklan Trading Company during the quarter is as follows:

Gross income (40% of sales) P 360,000

Less: Expenses 120,000
Net income P 240,000

37.50% of the expenses were from VAT-suppliers. All inventories were purchased from VAT
suppliers. Inventory increased by P 60,000 at the end of the month.
Compute the VAT payable.
a. P 45,000 c. P 30,600
b. P 37,800 d. P 28,800

SOLUTION:

VAT Payable = {[(360,000 x 12%) – (120,000 x 37.50%) + 60,000 x 12%]}

= P 30,600

10. ABC Construction Company started work on a P 5,600,000 fixed price construction contract.
Details of its operations during the quarter is presented below:

Total progress billings on the contract P 2,688,000

Collection from the contract 2,240,000
Depreciation Expense 600,000
Supplies expense 134,400
Salaries supplies 400,000
Utilities expense, inclusive of P 12,000 VAT 140,000

Assuming all data are inclusive if VAT, compute the VAT payable.
a. P 261,600 c. P 213,600
b. P 258,600 d. P 210,600

SOLUTION:

11. A VAT registered seller of goods had the following sales and purchases, exclusive of VAT:

Sales P 800,000
Sales returns and allowances 20,000
Purchases 600,000
Purchases returns and allowances 40,000

The VAT payable is

a. P 0 c. P 24,000
b. P 21,600 d. P 26,400
 SOLUTION:

VAT Payable = [(800,000 – 20,000) x 12% - (600,000 – 40,000) x 12%]

= P 26,400

12. Mrs. Baniaga, a fruit and vegetable dealer, had the following sales and purchases:

Sales of fruits and vegetables P 800,000

Purchase of fruits and vegetables 500,000
Purchases of cellphone and containers, exclusive of VAT 20,000

Determine the VAT payable.

a. P 0 c. P 72,000
b. P 33,600 d. P 38,400

13. A VAT –registered trader reported the following during the month:

Export sales P 800,000

Domestic sales 1,500,000
Purchases 1,200,000

Determine the VAT payable.

a. P 24,000 c. P 72,000
b. P 60,000 d. P 120,000
SOLUTION:

14. A domestic seller and exporter had the following summary of trading activities in the quarter:

Export sales P 1,000,000

Domestic sales 1,500,000
Purchases 1,200,000
P 36,000 input VAT was applied for a tax refund during the period. P 12,000 VAT was paid in the
two prior months of the quarter.

The VAT payable still due should be

a. P 24,000 c. P 60,000
b. P 36,000 d. P 72,000

SOLUTION:
Multiple-Choice- Problems: Part 2

1. A realty dealer disposed two residential units during the month:

Unit 141-B P 2,500,000

Unit 142-C 3,500,000
Total sales, exclusive of VAT 6,000,000

Total input VAT during the month 210,000

Compute the VAT payable.

a. P 720,000 c. P 297,500
b. P 510,000 d. P 210,000

SOLUTION:

2. A VAT –registered restaurant had the following transactions during the month:

Receipts from the food served P 600,000

Receipts from soft drinks 200,000
Purchase of rice, meat and vegetables 200,000
Purchase of vegetables 100,000
Purchase of soft drinks 120,000
Purchase of food condiments 80,000

Assume all amounts are exclusive if VAT.

Compute the VAT payable.
a. P 0 c. P 36,000
b. P 9,600 d. P 72,000

SOLUTION:

VAT Payable = 600,000 x 12%

= P 72,000

3. A VAT-registered tax practitioner who is using the cash basis of accounting disclosed the
following results of operations (exclusive of VAT):

Receipts from clients P 5,000,000

Advances from clients 1,000,000
Salaries expense 3,000,000
Depreciation expense 200,000
Office supplies expense 500,000
Utilities expense 50,000
 Compute the VAT payable.
a. P 150,000 c. P 634,000
b. P 534,000 d. P 654,000

SOLUTION:

VAT Payable = (5,000,000+500,000-50,000) x 12%

= P 654,000

4. A manufacturing subcontractor generated the following receipts from various clients:

Receipts from PEZA locator P 4,000,000

Receipts from non-PEZA locators 1,000,000
Input VAT traceable PEZA clients 100,000
Input VAT traceable to non-PEZA locators 50,000
Input VAT on general operations 60,000

Compute the VAT payable.

a. P 390,000 c. P 50,000
b. P 58,000 d. P 0

5. DZQC, a radio broadcasting company with 8M annual receipts, generated total revenue of 1M
out of which P 80,000 was collected during the month. It incurred a P 600,000 total expenditures
out of which P 224,000 were paid to VAT suppliers.

Compute the VAT payable.

a. P 0 c. P 48,000
b. P 24,000 d. P 72,000

6. A VAT-taxpayer had the following data during the month:

Regular sales P 3,000,000

Export sales 1,500,000
Input VAT on regular sales 240,000
Input VAT on export sales (80,000
Applied for tax credit certificate) 100,000

Compute the VAT payable.

a. P 120,000 c. P 20,000
b. P 100,000 d. P 0

SOLUTION:

7. An insurer had the following receipts and input VAT data during the month:
Life Non-life Total
 Cash collection P 4,000, 000 P 2,500,000 P 6,500,000
Promissory note 500,000 100,000 600,000

Traceable input VAT 120,000 80,000 200,000

Other input VAT 70,000

Compute the VAT payable.

a. P 232,000 c. P 207,000
b. P 220,000 d. P 195,000

SOLUTION:

8. A lessor of commercial spaces had the following receipts and input VAT data for the month:

Spaces with P 5,000 monthly rental P 500,000

Spaces with P 10,000 monthly rental 800,000
Spaces with P 15,000 monthly rental 700,000
Spaces with P 20,000 monthly rental 1,000,000
Total P 3,000,000

Total input VAT during the month 90,000

Compute the VAT payable.

a. P 360,000 c. P 204,000
b. P 270,000 d. P 153,000
SOLUTION:

9. A domestic airline had the following transactions during the month:

International operation
Receipts from outgoing flights P 2,000,000
Receipts from outgoing flight 2,500,000

Domestic operation
Transport of passengers P 4,000,000
Transport of cargoes, mails, excess baggage 1,500,000

Total claimable input VAT P 468,000

What is the VAT payable?

a. P 309,000 c. P 52,363
b. P 192,000 d. P 12,000
SOLUTION:
 10. A seller of goods had the following sales:

Sales of unprocessed agricultural food products P 200,000

Sales of unprocessed agricultural products 300,000
Sales of non-food products 500,000

Input VAT
- Purchase of goods and supplies P 28,000
- Purchase of equipment 24,000

Compute the VAT payable.

a. P 68,000 c. P 48,800
b. P 67,500 d. p 44,000

SOLUTION:

Multiple-Choice- Problems: Part 3

1. Denzi Marketing bought a building to house its retail activities. The following relates to its sales
and input VAT during the quarter:

Sales of goods P 3,000,000

Export sales 1,500,000
Sales of VAT-exempt of VAT 500,000
Total sales, exclusive of VAT P 5,000,000

Input VAT carry-over in the prior quarter P 60,000

Input VAT on purchase vatable goods 150,000
Input VAT on building (20 year life) 180,000
VAT paid in prior months 80,000

The building was acquired on the second month of the quarter.

a. P 0 c. P 70,000
b. P 64,000 d. P 130,000

SOLUTION:

2. A VAT-registered bus company had the following receipts in January 2015:

Receipts from passengers P 2,700,000

Receipts cargoes 300,000
Input VAT on gasoline 50,000
Input VAT on bus insurance and repairs 30,000
 Input VAT on purchase of a new bus 360,000

What is the VAT payable for January?

a. P 0 c. P 30,000
b. P 27,400 d. P 274,000

SOLUTION:

3. A domestic sea carrier had the following receipts and attributable input VAT for the month:

Receipts from passengers P 2,400,000

Receipts from cargoes 600,000
Total input VAT for the month 240,000

What is the VAT payable?

a. P 120,000 c. P 24,000
b. P 48,000 d. P 0

SOLUTION:

4. A VAT registered television company with annual receipts of P 8M reported P 1M total revenue
for the month of June 2015. It collected P 1,200,000 from various clients including advances and
paid P 800,000 of expenses, P 560,000 of which is paid to VAT suppliers.

The collections and payments are inclusive of VAT.

What is the VAT payable?

a. P 0 c. P 68,571
b. P 52,800 d. P 76,800

SOLUTION:

5. A bookstore had the following summary of transactions during the month:

Sale of books inventory P 300,000

Sale of school supplies, exclusive of VAT 700,000
Rental expense, inclusive of VAT 56,000
Salaries expense 100,000
Utilities expense, exclusive of VAT 20,000

What is the VAT payable?

a. P 120,000 c. P 78,120
b. P 84,000 d. P 77,000

SOLUTION:
6. Danes Bakeshop had the following details of operations during the month:

Sales of bread P 4,000,000

Sales of cakes 500,000
Importation of flour 1,000,000
Other purchases, inclusive of P 240,000 VAT 2,500,000
Salaries expenses 500,000
Other expenses, exclusive of P 120,000 VAT 1,200,000

Compute the VAT payable.

a. P 20,000 c. P 140,000
b. P 60,000 d. P 180,000

SOLUTION:
VAT Payable = [(4,500,000 x 12%) – (240,000+120,000)]

= P 180,000

7. Sweet Papa Corporation is a VAT- registered sugar refiner. Details of its operations are as follows:

Domestic sale of refined sugar P 3,000,000

Export sales of refined sugar 2,000,000

Purchases of sugar cane P 1,000,000

Other purchases, inclusive of VAT 448,000
Advanced input VAT paid P 240,000

What is the VAT payable?

a. P 312,000 c. P 72,000
b. P 272,000 d. P 32,000

SOLUTION:

8. Baguio General Hospital had the following receipts and input VAT:

Receipts from hospital operations P 20,000,000

Sales of medicines 4,000,000
Input VAT traceable to hospital operations 2,100,000
Input VAT on hospital drugstore 120,000

Compute the VAT payable.

a. P 660,000 c. P 300,000
b. P 360,000 d. P 260,000

SOLUTION:
VAT Payable = [(20,000,000 x 12%) – 120,000]
 = P 360,000

9. A VAT-registered professional review school had the following receipts during the month:

Tuition fees P 800,000

Miscellaneous fees 100,000
Sale of snacks 150,000

Reviewer salaries 300,000

Purchase of supplies, exclusive of VAT 150,000
Other expenses, inclusive of P 16,000 VAT 220,000

Compute the VAT payable.

a. P 0 c. P 92,000
b. P 2,000 d. P 110,000

SOLUTION:
VAT Payable = [(800,000+100,000+150,000) x 12% - (150,000+220,000)]

= P 92,000

10. Cordon College had the following receipts and input VAT payments:

Tuition fees P 800,000

Miscellaneous fees 200,000
Input VAT 20,000

Compute the VAT payable.

a. P 0 c. P 76,000
b. P 2,000 d. P 100,000

11. Polaris Company, a VAT seller, had the following sales and purchases during the month as
recorded on its books of accounts:
Customers

Government Foreigners Others Total

Sales P 1,000,000 P 2,000,000 P 4,000,000 P 7,000,000

Purchases 600,000 1,200,000 3,000,000 3,800,000

Polaris Company claimed P 45,000 of input VAT on export sales as tax credit.
Compute the VAT payable.
a. P 71,000 c. P 144,000
b. P 96,000 d. P 189,000
SOLUTION:
VAT Payable = (1,000,000+4,000,000-3,800,000) x 12%
= P 144,000
12. A VAT taxpayer made the following sales:

Sales to the government P 250,000

Sale to non-profit institutions 350,000
Sale to a registered Ecozone export trader 200,000
Sales to persons engaged in business 700,000
Sales to persons not engaged in business 500,000
Total sales P 2,000,000

Purchases and payments, inclusive of VAT P 1,512,000

P 20,000 actual and input VAT is traceable to the sales to the government.

Compute the VAT payable.

a. P 0 c. P 56,500
b. P 54,000 d. P 78,000