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06 Actvity 1

The document contains 3 items asking for tax calculations and deductions based on provided financial information. Item 1 asks how much is the allowable deduction from gross income for a corporation given sales, expenses, and interest income/expense. Item 2 asks for the correct amount of taxes that can be deducted from gross income given various taxes incurred and notes on deductibility. Item 3 asks how much is the deductible loss for an automobile that was partially damaged given its purchase price, depreciation, fair market values before and after the collision, and insurance proceeds.

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Murielle Fajardo
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558 views2 pages

06 Actvity 1

The document contains 3 items asking for tax calculations and deductions based on provided financial information. Item 1 asks how much is the allowable deduction from gross income for a corporation given sales, expenses, and interest income/expense. Item 2 asks for the correct amount of taxes that can be deducted from gross income given various taxes incurred and notes on deductibility. Item 3 asks how much is the deductible loss for an automobile that was partially damaged given its purchase price, depreciation, fair market values before and after the collision, and insurance proceeds.

Uploaded by

Murielle Fajardo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BM2215

ACTIVITY
Read and analyze each item. Provide what is asked. (3 items x 10 points)
1. Debtor Corporation (not classified as MSME) shows the following data during the 2021 taxable year:
Sales P500,000
Interest income, net of 20% final tax 24,000
Cost of sales 300,000
Salaries and wages 120,000
Interest expense 60,000
Rent expense 24,000
Advertising expense 6,000
Depreciation expense 5,000
Interest on unpaid taxes 5,000
Required: How much is the allowable deduction from the gross income?
Note that interest on taxes paid or accrued shall be deductible in full. It shall not be reduced by 20% of
interest income subjected to final tax.

2. ABC Company incurred the following taxes during 2021:


Documentary stamp taxes P1,000
Income taxes paid in favor of key officers as a fringe benefit 13,600
Income taxes paid in favor of rank-and-file employees as a fringe benefit 22,400
Local taxes, including a surcharge of P800 and interest of P200 6,000
Philippine income tax 100,000
Municipal tax 2,000
Community tax 1,500
Value-added tax 90,000
Compromise penalty on taxes 50,000
Percentage tax paid on the sale of shares sold thru the local stock 12,000
exchange
Donor’s tax for 2020 25,000
Foreign income tax payments claimed as tax credits 10,000
Required: What is the correct amount of taxes that can be deducted from gross income?
Note the following:
o Interest on surcharges is deductible from gross income but as “interest expense,” not as a tax expense.
o Income taxes paid in favor of key officers as a fringe benefit is a fringe benefit tax expense classified as manpower
cost or compensation expense. Fringe benefit tax (FBT) is a final tax of the employee, not the employer, withheld
only by the latter for remittance to the BIR. Likewise, income taxes paid in favor of rank-and-file employees as a
fringe benefit is also part of the compensation expense of the employer.
o The following items are non-deductible expenses: income tax, value-added tax, compromise penalty on taxes,
percentage tax paid on the sale of shares sold thru the local stock exchange, donor’s tax, and foreign income on
tax payments claimed as tax credits.

3. On July 1, 2018, a lawyer purchased an automobile for P500,000, which will be used exclusively for the
practice of the profession. He deducted annual depreciation based on an estimated useful life of five (5)
years. On July 1, 2021, the automobile was partially damaged in an accidental collision with another
vehicle. The vehicle's fair market value before the crash equals the carrying value of P200,000. After the
collision, the fair value was determined at P100,000. The taxpayer received insurance proceeds of
P70,000 to cover the loss.

06 Activity *Property of
STI
BM2215

Required: How much is the deductible loss?

Rubric for grading:


CRITERIA POINTS
Completed the solution with the correct answer 10
The last two (2) major steps of the solution are incorrect 7
Half of the solution is correct 5
The first two (2) major steps of the solution are correct 3
The first major step of the solution is correct 1

06 Activity *Property of
STI

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