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COLLEGE OF MARY IMMACULATE FINAL EXAMINATION

POBLACION, PANDI, BULACAN
FIRST SEMESTER-AY 2018 - 2019

STUDENT NUMBER SURNAME GIVEN NAME MIDDLE NAME

COURSE YRLVL/SECTION ROOM DATE PROCTOR SCORE

INCOME TAXATION (TAX 01)

MULTIPLE CHOICE

Items 1 and 2 are based on the following information:

During 2017, Champion Corporation gave the following fringe benefits to its employees:
Salaries to rank and file employees 1,000,000
Salaries to managerial employees 1,800,000
De minimis benefits to rank and file employees 54,400
De minimis benefits to managerial employees 27,200
Fringe benefits to rank and file employees 102,000
Fringe benefits to managerial employees 170,000

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1. How much is the fringe benefits tax?

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a. P 48,000 b. P 80,000 c. P 92,800 d. P 166,400

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eH w 170,000 / 68% x 32% = 80,000

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2. How much is the total allowable deduction from business income of Champion Corporation?
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a. P 3,153,600 b. P 3,233,600 c. P 3,246,400 d. P
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3,271,600
1,000,000 + 1,800,000 + 54,400 + 27,200 + 102,000 + 170,000 + 80,000 = 3,233,600
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3. In general, the applicable rate in computing fringe benefit tax prior to 2018 is:
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a. 32% b. 30% c. 25% d. 35%

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4. Based on the preceding number, if the employee is a nonresident alien not engaged in trade or business
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(NRA-NETB), the applicable rate is:

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a. 32% b. 30% c. 25% d. 15%

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5. Assuming further that the taxpayer is classified as special alien or Filipino employee, the fringe benefit
prior to 2018 shall be taxed at:
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a. 32% b. 30% c. 25% d. 15%

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6. In general, the applicable rate in computing fringe benefit tax beginning January 1, 2018 is:
a. 32% b. 30% c. 25% d. 35%
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Items 7 to 9 are based on the following information:

In 2016, Cheering Company paid for the monthly rental of the residential house of its branch manager
amounting to P204,000.

7. How much is the fringe benefit expense for the month?

a. P 48,000 b. P -0- c. P 102,000 d. P 204,000
The 50% rule for rental is only used for purposes of computing the FBT.

8. How much is the fringe benefit tax for the month?

a. P 48,000 b. P -0- c. P 102,000 d. P 204,000
204,000 x 50% / 68% x 32% = 48,000

9. The total allowable deduction from business income of Cheering Company is:
a. source
This study P 48,000 b. P 300,000
was downloaded by 100000796406086 from CourseHero.comc. P 252,000
on 10-15-2021 02:29:51 GMT -05:00 d. P 204,000

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 Total OPEX = Fringe benefits expense + FBT = 252,000

10. Monetized value of unused sick leave credits not exceeding 10 days to private employees is a tax exempt
benefit.
a. TRUE b. FALSE (VL only for private employees)

11. Monetized value of unused sick leave credits not exceeding 10 days to government employees is a tax
exempt benefit.
a. TRUE b. FALSE

Items 12 to 14 are based on the following information:

Intrams Company owns a condominium unit in “The One Residences” which is near the factory and the
plant’s administrative building. To make it convenient to its executive, it allowed the latter to use the said
property as his residence. The zonal value of the property is P32,000,000 while its fair market value as
shown in the current Real Property Tax Declaration amounts to P25,000,000.

12. How much is the fringe benefit expense?

a. P 800,000 b. P -0- c. P 32,000,000 d. P 25,000,000
The property is assumed to be part of the employer’s PPE. Hence, the cost of the property is assumed to
have been or will be recovered through depreciation expense.

13. How much is the fringe benefit expense?

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a. P 94,117 b. P -0- c. P 500,000 d. P 430,769

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32,000,000 x 5% x 50% / 65% x 35% = 430,769

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14. Assuming the acquisition cost of the residential property is P26,000,000 and the remaining useful life is 12

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years. How much is the fringe benefit expense?
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a. P 2,666,667 b. P -0- c. P 500,000 d. P 2,083,000
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Additional depreciation in the form of FB expense = 32M – 26M / 12 years = 500,000

If the ZV or market value of the property is greater than its cost subject to depreciation, the excess amount
shall be used in computing additional depreciation expense allowed as a deduction from the employer’s
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gross income as fringe benefit expense and shall be amortized over the remaining useful life of the asset.
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15. Kopiko Manufacturing Corporation operates a manufacturing plant in Davao Economic Zone (a PEZA
registered economic zone). Mr. Right was assigned to lead the conduct of audit and performance
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evaluation of the plant which is estimated to last for a period of 2-3 months. He was provided a free
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housing benefit for the duration of the audit in one of the prominent subdivision in the city. The zonal
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value of the property is P32,000,000 while its fair market value as shown in the current Real Property Tax
Declaration amounts to P25,000,000. Determine the fringe benefit expense and the fringe benefits tax
expense, respectively.
a. P800,000; P430,769 c. P32,000,000; P15,058,824
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b. P625,000; P294,118 d. P -0-; P -0-

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Temporary housing benefit of not more than 3 months is a nontaxable benefit.

Items 16 to 19 are based on the following information:

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In 2018, BSA4 Corporation bought a condominium unit in installment for the use of its executive. The
acquisition cost inclusive of 12% interest is P6,720,000. The fair market value of the property per Tax
Declaration is P6,800,000 while the zonal value is P6,500,000.

16. How much is the fringe benefit tax?

a. P 70,588 b. P -0- c. P 76,471 d. P 80,769
6,720,000 / 1.12 x 5% x 50% x 65% x 35% = 80,769
If installment for use of employee, monetary value = acquisition cost exclusive of interest

17. Assume the ownership of the property will be transferred to the executive, how much is the fringe benefit
tax?
a. P 3,058,524 b. P -0- c. P 3,500,000 d. P 6,500,000
6,500,000 / 65% x 35% = 3,500,000
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 If employer purchases and transfers ownership to the employee, monetary value = higher between
acquisition cost exclusive of interest and the zonal value as determined by the CIR

18. Assuming the property was transferred in the name of Bimbi, one of its executive, for a lower consideration
amounting to P5,800,000. How much is the fringe benefit tax?
a. P 538,462 b. P -0- c. P 329,412 d. P 470,588
6,800,000 – 5,800,000 / 65% x 35% = 538,462
If employer purchases and transfers ownership to the employee on a lesser amount, monetary value =
higher between FMV in the property tax declaration and the zonal value as determined by the CIR less cost
to the employee

19. Assuming the selling price is P7,000,000, how much is the fringe benefit tax?
a. P 538,462 b. P -0- c. P 329,412 d. P 470,588

20. In 2018, Pisngi Corporation purchased a motor vehicle for the use of its executive. It was registered under
the name of the executive although it was agreed that it shall be used partly for the benefit of the
company. The cost of the vehicle was P1,400,000. The amount of fringe benefit tax is:
a. P 658,824 b. P 753,846 c. P 329,411 d. P -0-
1,400,000 / 65% x 35% = 753,846

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21. During 2018 taxable year, First Metro Pacific was able to persuade Atty. Arnaldo to join the company as its

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Asst. Vice President for Finance which included a car plan worth P3,000,000 in its compensation package.
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First Metro purchased the vehicle and registered the same in favor of Atty. Arnaldo. Assuming further that

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Atty. Arnaldo is a nonresident alien not engaged in trade or business, how much is the fringe benefit tax?
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a. P 529,412 b. P 1,411,765 c. P 1,000,000 d. P
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1,615,385
3,000,000 / 75% x 25% = 1,000,000
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22. Based on the immediately preceding number, but assuming First Metro is an offshore banking unit, how
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much is the fringe benefit tax?

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a. P 529,412 b. P 1,411,765 c. P 1,000,000 d. P

1,615,385
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3,000,000 / 65% x 35% = 1,615,385

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Prior to 2018, special employees are subject to 15% FBT.

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23. Which of the following housing benefits is exempt from income tax?
a. Housing unit inside or adjacent (within 50 meters) from the perimeter of the business premises
b. Temporary housing for a stay in the housing unit for three months or less
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c. Housing privilege of military officials of the Armed Forces of the Philippines

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d. All of the above

e. None of the above
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24. Which of the following conditions is required in order that expenses incurred or paid by an employee but
which are paid or reimbursed by his employer will be exempt from income tax?
I. The expenditures are duly receipted for and in the name of the employer.
II. The expenditures are not of a nature of a personal expense attributable to the employee.
a. I only b. II only c. Any of I and II d. Both I and II are required

25. Expenses receipted in the name of the employer which do not partake the nature of personal expenses
attributable to employees should not be treated as taxable fringe benefits.
a. TRUE b. FALSE

26. The expenses described above, if incurred by a managerial employee, should neither be included in the
computation of fringe benefit tax nor in the determination of the individual taxpayer’s returnable
compensation income.
a. source
This study TRUE b. FALSE
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 27. Representation and transportation allowance given regularly on a monthly basis are not taxable fringe
benefits but taxable as compensation income subject to basic tax under Section 24(A) of the Tax Code.
a. TRUE b. FALSE

28. Expenses in connection with attending business meeting or convention in the Philippines such as food,
beverages, and transportation are nontaxable benefits of the employee.
a. TRUE b. FALSE

29. A domestic corporation provides fixed daily meal allowance to all its regular employees. The meal
allowance is:
a. Exempt from basic income tax
b. Subject to fringe benefit tax if the recipient is a rank and file employee
c. Subject to fringe benefit tax if the recipient is a managerial employee
d. Subject to basic income tax

30. Accountancy University (AU) granted a scholarship grant abroad (Master of Science in Accountancy) to
Christian, one of its regular faculty members. The management of AU believed that the university will be
able to improve its accountancy program through the scholarship grant. Nonetheless, no written contract
was executed between AU and Christian requiring the latter to remain in the employ of the employer for a
certain period of time. The scholarship grant is:
a. Subject to basic income tax or fringe benefits tax depending on the rank of Christian

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b. De minimis benefit, hence, tax exempt regardless of rank

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c. The benefit was provided for the benefit of the employer, hence, nontaxable on the part of the

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d. None of the above

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31. The cost of educational assistance extended by an employer to the dependents of an employee shall be
treated as taxable fringe benefits, unless:
a. The education or study involved is directly connected with the parent’s employer’s business or
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profession
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b. There is a written contract between the parents and the employer that the former is under obligation
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to remain in the employ of the latter for a period of time they have mutually agreed upon.
c. The assistance was provided through a competitive scheme under the scholarship program of the
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employer
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d. Any of the choices

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32. Reasonable business expenses which are paid for by the employer for foreign travel of his employee for the
purpose of attending business meetings or conventions shall not be treated as taxable fringe benefits,
except:
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a. Inland travel expenses such as expenses for food, beverages and local transportation
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b. Lodging cost amounting to an average of $300 or less per day

c. Cost of economy and business class airplane ticket
d. 30% of the cost of first class airplane ticket
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33. Meal allowance and lodging furnished by the employer to the employees are exempt from tax if furnished
for the “advantage or convenience of the employer”.
a. TRUE b. FALSE

34. Tax exempt meal allowance should be furnished within the premises of the employer.
a. TRUE b. FALSE

Items 35 to 38 are based on the following information:

The following data were taken from Virgilio (single), holding managerial position for 2018 taxable year:
Gross salaries @ P50,000 per month 600,000
SSS contributions 12,000
Philhealth contributions 7,200
Pagibig contributions 4,800
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 Union dues 3,000
Withholding tax on compensation income 73,250
Allowances not subject to liquidation 100,000
Gasoline allowances, subject to liquidation 17,000
13th month pay 50,000
De minimis benefits 12,000

35. The taxable compensation income subject to graduated rate under Section 24(A) of the Tax Code is:
a. P 465,000 b. P 576,000 c. P 573,000 d. P 600,000
600,000 – 12,000 – 7,200 – 4,800 – 3,000 = 573,000

36. The fringe benefits tax due is:

a. P -0- b. P 8,000 c. P 53,846 d. P 47,059
100,000 / 65% x 35% = 53,846

37. The total income tax expense of Virgilio is:

a. P 127,096 b. P 141,000 c. P 170,760 d. P 179,400
Taxable income 573,000
Basic tax [30,000 + (173,000 x 25%)] 73,250
FBT as computed in #32 53,846 FBT is income tax expense of the employee, not
the employer
Total income tax expense 127,096

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38. The income tax payable of Virgilio is:

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a. P -0- b. P 30,000 eH w c. P 43,250 d. P 73,250
Basic tax 73,250 – withholding tax 73,250 = 0

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39. The amount of de minimis benefits conforming to the ceiling of de minimis benefits shall be:
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I. Exempt from income tax, regardless of the rank of the employee.

II. Not be considered in determining the P90,000 ceiling of other benefits excluded from the gross
income under the Code, as amended.
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a. I only b. II only c. Neither I nor II d. Both I and II

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40. The excess of the de minimis benefits over their respective ceilings prescribed under the regulations shall
be:
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a. Considered as part of other benefits subject to tax only on the excess over the P90,000 ceiling
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b. Not be considered in determining the P90,000 ceiling of other benefits excluded from the gross income
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under the Code, as amended

c. Both a and b
d. Neither a nor b
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41. The amount of P90,000 under “other benefits” which are excluded from gross income shall:
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I. Not be applicable to self-employed individuals.

II. Not be applicable to income generated from the conduct of trade or business.
III. Shall be applicable to all types of income.
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a. I only b. I and II only c. I, II and III d. None of the choices

42. “Other benefits” under revenue regulations, include:

I. Christmas bonus.
II. Productivity incentive bonus.
III. Loyalty awards.
IV. Gifts in cash or in kind and other benefits of similar nature actually received by officials and
employees of both government and private offices.
a. I only b. I and III only c. I, II and III d. I, II, III and IV

43. The grossed-up monetary value shall be an expense deductible on the part of the employee.
a. TRUE b. FALSE

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 44. Those who are vested with powers or prerogatives to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
a. Rank and file employee b. Supervisory employee c. Managerial
employee

45. For purposes of determining what a managerial position is, the decision-making test may apply.
a. TRUE b. FALSE

46. Fringe benefit is any good, service or other benefit furnished or granted by an employer, in cash or in kind,
in addition to basic salary to an individual employee
a. TRUE b. FALSE

47. Those who, in the interest of the employer, effectively recommend such managerial actions if the exercise
of such authority is not merely routinary or clerical in nature but require use of independent judgment.
a. Rank and file employee b. Supervisory employee c. Managerial
employee

48. Fringe benefit tax is computed based on:

a. Monetary value c. Net compensation
b. Gross compensation d. Grossed-up monetary value

49. Grossed up monetary value is reflected in the books of accounts as fringe benefit expense and fringe

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benefits tax expense.

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a. TRUE b. FALSE

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50. Failure to withhold the required tax on salary is collectible from the employer.

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a. TRUE b. FALSE
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*********************************************END*****************************************
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COLLEGE OF MARY IMMACULATE FINAL EXAMINATION

POBLACION, PANDI, BULACAN
FIRST SEMESTER-AY 2018 - 2019

STUDENT NUMBER SURNAME GIVEN NAME MIDDLE NAME

COURSE YRLVL/SECTION ROOM DATE PROCTOR SCORE

INCOME TAXATION (TAX 01)

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1. ________ 11. ________ 21. ________ 31. ________ 41. ________
https://www.coursehero.com/file/70115424/Tax-01-FINALS-Oct-6-2018-BSA4-Answer-keydocx/
 2. ________ 12. ________ 22. ________ 32. ________ 42. ________

3. ________ 13. ________ 23. ________ 33. ________ 43. ________

4. ________ 14. ________ 24. ________ 34. ________ 44. ________

5. ________ 15. ________ 25. ________ 35. ________ 45. ________

6. ________ 16. ________ 26. ________ 36. ________ 46. ________

7. ________ 17. ________ 27. ________ 37. ________ 47. ________

8. ________ 18. ________ 28. ________ 38. ________ 48. ________

9. ________ 19. ________ 29. ________ 39. ________ 49. ________

10. ________ 20. ________ 30. ________ 40. ________ 50. ________

__________________________________________________________________________________________________

COLLEGE OF MARY IMMACULATE FINAL EXAMINATION

POBLACION, PANDI, BULACAN
FIRST SEMESTER-AY 2018 - 2019

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STUDENT NUMBER SURNAME GIVEN NAME MIDDLE NAME
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COURSE YRLVL/SECTION ROOM DATE PROCTOR SCORE
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INCOME TAXATION (TAX 01)
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1. ________ 11. ________ 21. ________ 31. ________ 41. ________

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2. ________ 12. ________ 22. ________ 32. ________ 42. ________

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3. ________ 13. ________ 23. ________ 33. ________ 43. ________

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4. ________ 14. ________ 24. ________ 34. ________ 44. ________

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5. ________ 15. ________ 25. ________ 35. ________ 45. ________

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6. ________ 16. ________ 26. ________ 36. ________ 46. ________

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7. ________ 17. ________ 27. ________ 37. ________ 47. ________

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8. ________ 18. ________ 28. ________ 38. ________ 48. ________

9. ________ 19. ________ 29. ________ 39. ________ 49. ________

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10. ________ 20. ________ 30. ________ 40. ________ 50. ________

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