The contracting parties may establish such

stipulations, clauses, terms, and conditions as

they may deem convenient, provided they are
LAW
not contrary to law, morals, good customs,
public order, or public policy
The nullity of the principal obligation carries
Liberty to contract
within the nullity of the penal clause. II. The
D is obliged to give C a specific watch, a specific nullity of the principal obligation does not carry
ring, or a specific bracelet. The parties agreed with it the nullity of the penal clause. III. The
that C will have the right to choose the thing nullity of the penal clause carries with it the
which will be given to him. Before C could make nullity of the principal obligation. IV.The nullity
his choice, the watch and the ring are lost of the penal clause does not carry with it the
though nullity of the principal obligation
D’s fault, successively. What is the right of C?*
Both are true
a. C may choose the delivery to him of the
D borrowed P50, 000.00 from C. On due date, D
bracelet, or the price of the watch or the price
offered to give his ring, his bracelet or his
of the ring plus damages.
necklace in payment of the debt five days from
the due date of the original obligation. C
accepted the offer. Two days before the new
D is obliged to give C a specific ring. The parties due date, D’s ring was lost through his fault.
agreed that D may give a specific bracelet as
substitute. Which of the following statement is D is not obliged to pay damages to C for the loss
true?* of the ring due to his fault.

a. If the ring is lost through a fortuitous event P took a public bus is going to his office.
before substitution, the obligation is Although P paid his fare, the bus conductor did
extinguished. not issue to him a ticket. Along the way, the bus
met an accident causing a slight injury to P and
other passengers. If P is to recover damages
from the bus owner, the source of the bus
A, B, C and D, solidary debtors, are obliged to
owner’s liability is
give V, W, X, Y and Z, joint creditors, P20,
000.00.* Contract

b. V may collect from C P4, 000.00. In a limited partnership where there are four
partners?

It is enough that there is one limited partners

A, B, C and D, joint debtors, are obliged to give
and the rest may all be general partners
V, W, X, Y and Z, solidary creditors, P20,
000.00.* A borrowed 100 from b with a rings given to b
by a way of pledge, the ring would belong to b,
c. V may collect from B P5, 000.00.
this fortiture is?

Pactum commisorium
 are mentioned in the following enumerations.
Which among them is not a requisite?

d. That there must be an existing agency between

either of the contracting parties and the third
person.
A borrowed 100,000 from b and as asecurity, a
pledge his ring to b, after obligation fails due, a
France offered to sell her cellular phone for P10,000
goes to be relinquishing ownership of the ring in
to her friend, Serra. Serra accepted the offer but is
favour of b. this is?
willing to pay only P8,000. Is ther a perfected
Dacion en pago contract?

No, because the acceptance was qualified and it

constituted a counter-offer.
O was cleaning the glass window of his building
when a large piece of broken glass fell down On July 1, Abaca offered in writing to sell
directly hitting the roof of a car which was Batangueño his car for P300,000. Batangueño
parked below. C, owner of the car, was not accepted the offer and mailed the letter of
around. Sensing that he would be made liable acceptance on July 10 which was received by Abaca
for the damage on the car, O immediately went on July 20. However on July 15, Batangueño had
down and cleaned the mess. O seeing that W already mailed a letter revoking his acceptance. Is
had witnessed all that happened, proposed to there a perfect contract?
give w P2, 000.00 so that W would not testify in
case a court case is filed. W agreed to the d. None, because at the time of the receipt of the
proposal and accepted the money. Based on the letter of acceptance, there had already been a prior
revocation of said acceptance
foregoing facts, which of the following
statements is incorrect. Josephine, Ellen, Wilma, Edith and Lydia are
partners in Jewel Company, ltd. Josephine, Ellen,
b. The Agreement between O and W is binding
Wilma are general partners, Edith is a
on both of them.
generallimited partner, while Lydia is a limited
partner. Based on the foregoing information, which
of the following statements is false?
One of the following contracts is not vitiated by
intimidation or violence, and hence valid Edith may not be held liable with her separate
property for partnership debts after exhaustion of
A contract where a party was compelled to partnership assets
assign his property to the other to pay a just
debt because the latter threatened to sue him in Daong and Depante have been partners for more
court if he does not pay his debt. than 5 years in the purified water business. At the
start of the sixth year, Daoang assigned his interest
in the partnership to Trinidad, but Depante
In order that a stipulation in favor of a third objected on the ground that he did not want
person in a contract would be valid and binding Trinidad to be his partner
upon the parties thereto, three of the requisites
Daoang and Depante continue to be partners Which of the following characteristics oof
despite Daoang’s conveyance of his interest to partnership as a contract?
Trinidad.
Preparatory

The following are qualifications of incorporators.

Choose the exemption

Majority of whom must be Filipino

Magic Company is a partnership composed of
Martha, Agnes, Glenda, Irenece and Candice
with Marha as manager who is authorized to Place of residence of corporation shall be its.
collect the credits of the partnership. Theresa
owes Martha P4,000.00 which is due on Place of incorporation
December 10. She also owes Magic Company This shall constitute a quorum for transactions of
P6,000.00 which is due on December 20. On corporate business
December 15, Theresa tendered payment in the
amount of P4,000.00 to Martha in payment of Majority directors
her debt to the latter.
Right which existing stockholders of corporation
The payment will be applied in its entirety to cannot be deprived without consent is their right to
Martha’s credit. subscribe or to purchase new stock issued by
corporation?
One of this following is not a characteristics of
contract of partnership? Pre-emptive right

Real, in that the partners must deliver their Juridicial personality of corporation begins
contributions in order for the partnership
contract to be perfected. From the date of issuance of certificate of
incorporation.
When the debtor binds himself to pay as soon as
he has means A partnership is not dissolved on the death of a

The obligations is valid, but the creditor must go Limited partner

and ask …
Which will not cause automatic dissolution of a
The minimum capital in money or property limited partnership?
except when immovable property or real rights
Death of limited partnership
thereto are contributed will require the
partnerships contract to be in public instrument Which of the following will not cause the automatic
to be registered in sec? dissolution of a general partnership?

3,000.000 Insanity of a partner

A corporation acquires juridicial personality? Which of the following will not cause the automatic
dissolution of a general partnership? Insanity of an
Upon issuance of the certificate of
industrial partner
incorporation.
One who takes charge of the winding up of
partnership affairs upon dissolution.
A, B and C entered into an oral contract of
Liquidating partner partnership each contributing P1M each to the
common fund plus other personal properties of the
The secretary of stock corporation shall be? same amount and failed to register the partnership
with the SEC. is the partnership valid?
Resident and citizen of the philippines
Yes, because public instrument is necessary only in
The following aqualifications of directors in a
case of contributions of immovable
corporation. Choose exemptions?

Majority of the directors must be Filipino citizen

Partners A, B and C contributed: P-P1M; B-P2M; C
The following are some of the requisites of de
service. After exhausting the partnership assets, the
facto corporation. Choose exemption
creditors still have a claim for P.3M. For how much
None of the above are the partners liable to the creditors for the
partnership liability?
When an unlawful partnership is dissolved by a
judicial decree, to whom shall the partnership C. All of A, B and C are liable pro rata to the
profits go? creditors

To the State Bears the loss of property contributed to the

partnership
Which of the following statements concerning
associations and societies, whose articles are Partners contributing usufructuary rights
kept secret among the embers, and wherein any Which of the following statements concerning the
one of the members may contract in his own name of a partnership is false?
name with third persons is correct?
The partnership cannot adopt a name which does
They shall be governed by the rules on not include the name of at least one of the partners
coownership
Querubin, Roces and Solis are partners in a law firm.
The following statements Querubin was appointed as judge of the regional
concerning partnership are correct, except.
trial court. Such appointment.
Answer: All partnership contracts are consensual

It is a principle which means that a partner has a Results in dissolution of the partnership
right to choose those whom he wants to be
Braganza, Ortiz, and Nevado want to form a
associated with the partnership.
partnership with Braganza contributing 500,000;
Delectus Personae Ortiz, office equipment; and Nevado, his services. If
the three were to form a limited partnership, who
The following are advantages of a partnership as among them will be the limited partner/s?
a form of organization. Which is not?
Either Braganza or Ortiz or both of them
There is constant likelihood of dissension and
disagreement when each of the partners has the
same authority in the management concern
 Refer to the preceding number, assume that the Statement 1: Spouses can validly enter into a
three decide to form a general partnership. As a particular partnership with each other Statement 2:
result, which of the following is incorrect? A The profits and losses of the partnership shall be
divided equally among the partners if they have no
Only Nevado may be appointed as manager profit and loss sharing agreement.
because he only contributes his services Only 1 is true
One/more but less than all the partners have no
authority to perform the following acts, except: Statement 1:A stipulation exempting a capitalist
Convey partnership property in the ordinary partner from losses is valid. Statement 2: When a
course of partnership business. partner has been appointed manager in the articles
of partnership, he may be removed without just
A partnership without a definite period of
cause by the vote of the partner owning the
existence and which can be dissolved at any
controlling interest. Answer: Both are False
time by any of When the manner of
management has not been agreed upon, who Three (3) of the following are rights of a partners.
shall manage the affairs of the partnership? Which one is not?

All of the partners Right to admit another partner

Donna, Emma, Alma and Rona are partners in In the ABC Partnership, A and B contributed
DEAR Company with Donna as manager. Tricia P20,000 each and C , his services. After paying all
owes Dear Company P5,500 and Donna, in the creditors of the partnership, only P18,000 in
Donna’s personal capacity, P4,500. Tricia’s debt cash remains. In the absence of terms to the
to Donna is secured by a pledge of her diamond contrary, the share of C is equal to:
ring. Both debts are already due. Tricia pays
Nothing
P4,500 to Donna and tells her that the same is in
payment of her debt to Donna. Donna, thus, Partner in a partnership who is not really a partner,
issues her personal receipt not being a party to the partnership agreement, but
is made liable as a partner for the protection of
The payment of P4,500 will be applied entirely
innocent third persons is known as.
to Donna
: Nominal partner or partner by estoppel
Statement 1:An artificial person like a
corporation may be a partner in a partnership
Statement 2: A limited partner may contribute
money and/or property to a partnership but not Three (3) of the following are rights of a general
services partner and also of a limited partner in a limited
partnership. Which is not
Answer: Only 2 is true
None of the above
Statement 1:A partnership has a personality
separate and distinct from each of the partners. A and B are co-owners of a parcel of land from
Statement 2: A partnership begins from the where they share the profits equally as co-heirs in
moment of the execution of the contract. unless inheritance. Is there a partnership?
a different date is stipulated.

Both are True

There is no partnership because co-ownership A decree by the court is necessary to dissolve a
by itself does not establish a partnership despite general partnership based on three of the following
the sharing of profits grounds. Which one will not require such decree
but will cause the automatic dissolution of the
A and B are partners in AB partnership. While A partnership?
was performing his duties as a partner in the
course of business, he negligently caused A partner is civilly interdicted.
damage to X, a third person. Who shall be liable One who takes charge of the winding up of
to X and up to what extent? partnership affairs upon dissolution

A, B, and the Partnership are all liable solidarily Liquidating partner

to X
Types of partnership in which the partners enjoy
On April 1, 2018, A and B entered into a contract practically all the profits:
of partnership for the purpose of selling cows’
milk, with the former as capitalist partner and Universal partner
the latter as industrial partner. It was agreed
Statement no. 1: Just before the obligation became
that A shall contribute 1,000 cows to the
due and demandable, the debtor proposed to the
common fund on May 2, 2018. Upon the arrival
creditor that he would give him a specific car
of the designated date, A failed to deliver the
instead of paying 150,000.00, and which proposal
contribution he promised. As a result. Answer: B
was accepted by the creditor. Here, there is
can compel A to deliver his contribution and its
extinguishment of an obligation by way of dacion en
fruits without the necessity of demand
pago. Statement no. 2: After substitution in
Three of the following will cause the automatic facultative obligations, the loss of the principal
dissolution of a general partnership. Which one through the fault or negligence of the debtor shall
will not? render him liable for damages in favor of the
creditor.
Answer: A partner becomes in any way
incapable of performing his part of the Both are false
partnership contract.
.In order that a stipulation in favor of a third person
Which of the following is correct? Answer: A in a contract would be valid and binding upon the
partner who has undertaken to contribute a parties thereto, three of the requisites are
sum of money and fails to do so becomes a mentioned in the following enumeration. Which
debtor only for the interest from the time he among them is not a requisite? a. There must be a
should have complied with his obligation stipulation in favor of a third person. That there
must be an existing agency between either of the
Common property in a universal partnership contracting parties and the third person.
Answer: All present property and all profits that
they may acquired therewith Coverage of Statute of Frauds in a partnership
contract, which is the exemption?
One of the following is not a characteristic of
contract of partnership. Answer: Real, in that If the agreement to reform a partnership shall be
the partners must deliver their contributions in performed within a year the same must be in
order for the partnership contract to be writing
perfected.
Which of the following statement is correct
concerning liability when a partner in a general
partnership commits a tort while engaged in
partnership business?

The partners are jointly and severally liable

A corporate officer or director cannot take
advantage their personal benefit in business
opportunity which the corporation is financially
able to undertake.

Doctrine of corporate opportunity

A corporation cannot be an incorporator in the

Philippines because only natural persons may
become incorporators, except

Cooperative as incorporator of rural bank

The following are expressed powers of a

corporation, except:

None of the above

A, B, C, D and E organized a corporation. An

article of incorporation was prepared, signed
and acknowledge before a notary public and
filed with the SEC. The corresponding certificate
of incorporation was issued. It turned out,
however, that A, B and C are not residing in the
Philippines. What is the status of the
corporation?

None of the above

If bonds are issued a t a premium, this indicates FAR
that

The nominal rate of interest exceeds the yield Related parties include all of the following,
rate except.
Under cash basis, revenue is record Sold a car to the uncle of the entity’s finance
director
When realized
An entity that entered into a related party
Which of the following basic financial
transaction would be required to disclose all of
statements are prepared as a minimum for
the following information except. Nature of
interim financial reporting?
any future transactions.
Statement of Financial Position, Statement of
The major financial statements include all
Comprehensive Income, Statement of Cash
except.
Flows, and Statement of Changes in Equity
Statement of retained earnings
The cost of the land usually includes all except*
c. Private driveway and parking lot A cash over or short*

An operating segment is considered reportable Is debited when the petty cash fund proves
when any of the following conditions are met, out short
except*
Which of the following is a characteristic of a
a. Segment liabilities are 10% or more of the perpetual inventory system?
combined liabilities of all segments
Cost of goods sold is recorded in every sale.
If a company fails to record accrued salaries at
year-end results in* When the accounts receivable are sold
outright, the accounts receivable have been
a. Overstated retained earnings
Standard setting body Factored

Financial Reporting Standards Council Which of the following costs are expensed
immediately?
The operating cycle of the entity.
d. All of these are expensed immediately
Is the time between the acquisition of
materials entering into a process and their
realization in cash.
On April 30, 2021, Honey Company issued at 105
Related parties include all of the following,
plus accrued interest 5,000 bonds of 11%, P1,000
except.
face amount. The bonds are dated January 1, 2019
Two ventures simply because they share joint and mature on January 1, 2029. Interest is payable
control over a joint venture. semiannually on January 1 and July 1. The entity
paid bond issue cost of P300,000. What is the net
cash received from the bond issuance?*
a. 5,033,333 Able Company provided the following data for the
purpose of reconciling the cash balance per book
b. 5,133,333 with the balance per bank statement on Dec.
31:Balance per book 950,000; Proceeds of note
c. 5,387,500
collected by bank for Able Company 550,000 (net of
d. 5,087,500 service charge of 10,000); Interest earned on note
20,000; NSF check of customer 400,000;
Sunny Company acquired a machine on July 1, outstanding checks 220,000; deposit placed in night
2019 and paid 5,200,000 including freight depository 180,000; erroneous credit to Able
50,000 and installation 150,000. The estimated Company’s account representing proceeds of loan
life of the machine is 8 years or a total of granted to another Company 250,000. What is the
100,000 working hours with no residual value. adjusted balance per book?
The operating hours of the machine totaled
3,000 hours in 2019 and 12,000 hours in 2020. Ans: 950k+550k+20k-400k =1,120M
The entity followed the working hours method
Honey Company had the following account balances
of depreciation. On December 31, 2020, what is
on December 31, 2019:Cash in Bank 1,550,000;
the carrying amount of the machine
Cash on hand 250,000; Petty Cash fund- all funds
b. 4,420,000 were reimbursed at year end 30,000; Share
investment of 1,000,000 that are very actively
Hope Company reported the following traded in the stock market; Treasury bills of
information: Undeposited collections 550,000; 1,500,000 with a 5 year term but purchased on Aug.
Checkbook balance 2,500,000; Petty Cash Fund 31 4 months before its maturity date. The cash in
of 50,000 (comprised the following on Dec. 31, bank included 400,000 of compensating balance
2019: Coins and currencies 15,000, petty cash against short term borrowing. The compensating
vouchers 31,000, refundable deposit for balance is legally restricted as to withdrawal. What
returnable containers 4,000); a check of 31,000 total amount should be reported as Cash?
was drawn on Dec. 31, 2019 payable to Petty
cash; Customer A check amounting to 150,000 Answer: 1550M + 250k + 30k – 400k =1,430M Love
dated Jan. 3, 2020 was included in the Dec. 31, Company has given the following information:
2019 checkbook balance; customer B check for Accounts receivable Jan. 1 is 650,000; credit sales
2,700,000; sales return 75,000 (sa exam 200k bay na
325,000 deposited on Dec. 15, 2019 was
di); accounts written off 40,000; collections from
included in the checkbook balance but returned
customers 2,150,000; estimated future sales return
by the bank for insufficiency of fund. This was at Dec. 31 is 50,000; estimated uncollectible
redeposited on Dec. 26, 2019 and cleared after 3 accounts at Dec.31 per aging is 110,000. Additional
days; a check payable to vendor dated and credit sales of 200,000 was noted. What is the net
recorded on Dec. 31, 2019 amounting to realizable value of the accounts receivable on Dec.
200,000 was mailed on Jan. 5, 2020. What is the 31?
adjusted cash in bank on Dec. 31, 2019?*
Answer: 2.7m-75k-2,150m=1,125m
a. 2,550,000
Lovely Company provided the following
Using previous problem, what amount should be information: AR beginning 4,000,000; AR collected
reported as cash?* 8,400,000; Cash sales 2,000,000; Inventory Beg
4,800,000; Inventory end 4,400,000; Purchases
c. 3,146,000 10,000,000; Gross margin on sales 4,200,000. What
amount should be reported as accounts interest on Dec. 31, 2019 and Dec. 31, 2020. On July
receivable on Dec. 31? 1, 2020, the entity discounted the note at a bank at
an interest rate of 12%. What is the amount of
Answer: 4.8M + 10M – 2M – 4.4M + 4.2M – discount of the note?
8.4M + 4M = 8.2M
Answer: 500 x 20% =100k plus 500,000= 600k
Happy Company provided the following data for x12%x6/12 = 36k
the current year: Sales 9,500,000; Sales return
and allowances 800,000; sales discounts
200,000; accounts written off as uncollectible
BPI granted a loan to a borrower on January 1,
200,000; allowance for doubtful accounts Jan.1
2019. The interest on the loan is 8% payable
is 180,000. The entity provided for doubtful
annually starting December 31, 2019. The loan
accounts expense at the rate of 15% of net
matures in three years on December 31,
sales.What amount should be reported as
2021.Principal amount is 3,000,000, origination fee
doubtful accounts expense?
charged against the borrower 100,000; Direct
Answer: 9.5M – 800k – 200k = 8.5M x 15% = origination cost incurred 260,300. After considering
1,275M the origination fee charged to the borrower and the
direct origination cost incurred, the effective rate
Hope Corp. provided the following information on the loan is 6%. What is the carrying amount of
during the first year of operations: Total the loan received on January 1, 2019?
merchandise purchases for the year 7,000,000;
merchandise inventory Dec. 31 is 1,400,000; Answer: 3M + 260,300 – 100k = 3,160,300
collections from customers 4,000,000. All
merchandise was marked to sell at 40% above
cost. All sales are on a credit basis and all
receivables are collectible. What amount should
be reported as accounts receivable on Dec. 31? Based on a physical count, Spirit Company revealed
Answer: 7M – 1.4M = 5.6M + 2,240M (5.6M x inventory on Dec. 31, 2019 at 3,050,000 but before
40%) – 4M = 3,840M of any of the necessary adjustments of the
following: Merchandise costing 250,000 FOB
Hope Company factored without recourse
shipping point from a vendor on Dec. 31, 209 was
5,000,000 of accounts receivable with a bank.
received on Jan. 15, 2020; Merchandise costing
The finance charge is 2% and 3% was retained to
350,000 shipped FOB destination from a vendor on
cover sales discounts, sales returns and sales
Dec. 28, 2019 was received on January 5, 2020;
allowances. What amount of cash was received
Merchandise costing 170,000 shipped to a customer
on the sale of accounts receivable?
FOB destination on Dec. 28, 2019 arrived at the
Answer: 5M – 2% and 3% = 4,750M customer location on January 2, 2020; Merchandise
costing 180,000 was being held on consignment by
Love Company, a consignee of Spirit Company.
What amount should be reported as inventory on
On July 1, 2019, Honey Company sold
Dec. 31, 2019?
equipment to Love Company for 1,000,000.
Honey accepted a 20% note receivable for the Answer: 3,050M + 250k + 350k = 3,650m
entire sales price. This note is payable in two
equal installments of 500,000 plus accrued
Palawan Company presented the following Ending Invty at retail = 5.5 – 4.5 = 1M + 1M = 2M
data:Beginning Raw Materials is 90,000 units at
Average cost= 2M x 55.36% 1,107,600
P7, Purchases 75,000 units @P8, and another
purchases of 120,000 units @P8.50; 195,000
units of raw materials were transferred to work Love Company had the following property
in process during the year. Work in process acquisitions during the current year:Acquired a tract
beginning 50,000 units @P14, Direct labor of land in exchange for 50,000 shares of Precious
3,100,000; Manufacturing overhead 2,950,000; Company with 100 par value that had a market
and Work in process ending 48,000 units @15. price of 120 per share on the date of acquisition.
The entity used the FIFO method of valuing The last property tax bill indicated assessed value of
inventory. What is the cost of raw materials 2,400,000 for the land.Received land from a major
used? shareholder as an inducement to locate a plant in
the city. No payment was required but the entity
Answer: 90k x 7 = 630k + 600k + 1,020M (75k x 8 paid 50,000 for legal expenses for land transfer. The
and 120k x 8.50) = 2,250M land is fairly valued at 1,100,000. What is the total
increase in land as a result of the acquisitions?
Based on a physical inventory, Candy Company
determined the candy inventory on a FIFO basis Answer: 7.1M
at 5,200,000 with a replacement cost of
4,000,000. The entity estimated that after ABC Company has a policy about the bonus of
further processing costs of 2,400,000, the managers which is equivalent to 10% of the net
candies could be sold as finished bars for income after bonus and tax. The income tax rate is
7,500,000. The normal profit margin is 10% of 30%. A manager received P280,000 for the current
sales. Using the measurement at the lower of year as bonus. What is the income before bonus
cost or net realizable value, what amount should and tax?
be reported as candy inventory at year-end?
Answer: 280k/10% = 2.8M /70% = 4M +280k =
Answer: 7.5M – 2.4M = 5.1M 4,280M
Metrobank Company used the retail method of Happy Company sold 375,000 boxes of cake mix
inventory valuation. The entity provided the under a new sales promotional program during the
following information: Cost of Beginning year. Each box contained one coupon, which
inventory is 600,000 and purchases of entitled the customer to a baking pan upon
3,000,000. The retail amount for beginning remittance of P50. The entity paid P60 per pan and
inventory is 1,500,000; retail purchases of P15 for handling and shipping and estimated that
5,500,000; net markups 500,000; Net 80% of the coupons would be redeemed, even
markdowns 1,000,000; and sales revenue of though only 140,000 coupons had been processed
4,500,000. What is the estimated cost of ending during the year. What amount should be reported
inventory under the average cost retail method? as premium expense for the current year?

Answer: Cost = 600k +3M = 3.6M Answer: 60-15 = 25

Retail = 1.5M + 5.5M + 500k – 1M = 6.5M 375k x 80% = 300k – 140k = 160k

3.6M/6.5M = 55.38% 300k x 25 = 7.5M

Net sales = 4.5M

Believers Inc. used the direct method to prepare Answer: 3.5M
the statement of cash flows. the entity had the
Cost of the land = 9,600,000 x 40% = 3,840,000
following cash flows during the current year: + 5,400,000 = 9,240,000 – 2,000,000 =
Cash receipts from customers 2,000,000; Cash 7,240,000
receipts from issuance of ordinary shares
Cost of the building = 8,160,000
4,000,000; Cash receipts from dividends on long
term investments 300,000; Cash receipts from
repayment of loan made to another entity
Net purchases = 900k
2,200,000; Cash payments for wages and other
operating expenses 1,200,000; Cash payments Ending MI – 20k
for insurance 100,000; cash Payments for
dividends 200,000; Cash Payments for taxes Beginning MI – 250k
400,000; Cash payment to purchase land
800,000; Cash balance beginning 3,500,000. What is the COGS = 920k
What amount should be reported as net cash
provided by operating activities?
East Company = 4,083,500
Answer: 600k
650k x 5.95 = 3,867,500
800k x 0.27 = 216,000
ABC Company: = 4,083,500

280k/10% = 2.8M Abby Company = 140k

Mavi Company = 2.7M premium exp. 2020
2.8M/70% = 4M + 280k = 4,280,000
(600k/10x (50-10+5)
4,280,000 – 280k = 4M – 1.2M (4M x 30%) = Premium exp. 2021 = 750k/10x (50-10+5)
2.8M
*2.5M x 30% = 750k
Interim segment sales of product, sold to Estimated liability 2020 = 200k/10 x 45 = 900K
unaffiliated customers 5M, sales to
unaffiliated customers 30M, Interest earned Estimated liability 2021 = 250k/10 x (5010+5) =
400k, Indirect Expenses 3M, General 1,125,000
corporate expenses 5M.

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D B A A A
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B D D B B
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 TAXATION
Excise tax is a?

Indirect tax
Scheduler system of income taxation means?
Primary purpose of taxation? To
raise revenue for the goverment Separate graduated rates are imposed on
different types of income
Theory of taxation?

Necessity Allowable deduction fom tax basis is an

application?
Basis of taxation?
Ability to pay theory
Reciprocal duties of support and protection
Incorrect statement?
Nature of taxation?
Taxes should collected only for public
Generally for public purposes improvement

General characteristics of taxation? Statement 1. Symbolic

Payable in money Statement 2. Jurisdiction Both

statements are incorrect
Real property is not an?
A written notice informing a taxpayer?
Excise or privileged tax
Notice for informal conference
Income tax is not an?
Select incorrect statement?
Specific tax
The police power is superior to the
Basic principle of sound tax system? nonimpairment clause of the constitution

Fiscal adequacy, administrative feasibility, and Select the correct statement

equality or theoretical justice
The police power of the state is superior to the
Administrative act in taxation? non-impairment clause of the institution

Collection of taxes Statement 1. The president has the power

Tax classified as to object which does include? Statement 2. The president is superior

Direct True, false

Concept of situs taxation? Statement 1. The power of taxation is inherent

Territoriality Statement 2. Even in the absence of any

constitutional provision
Not nature of business tax?
True, true
They are either ad valorem or specific
The department of finance its officer entered Void, because power to grant tax exemption is
into contract? used in congress
In every case of debt, tax statutes are construed?

Strictly against the government and liberally in favour

of taxpayer

In every case of debt, tax exemption are construed?

Liberally in favour of the government and strictly

against taxpayer

The law passed by the congress which granted tax

amnesty?

Valid, because there is a proper classification

Under train law, the book of accounts shall be audited?

Gross annual sales, earnings, receipts or output exceeds

3 million.

For income tax purposes, the term corporation shall

be included all the following?

General professional partnership

Tax distinguished from special assessment?

Based on necessity and is to raise revenue

Which of the following statement is correct?

Every sovereign government has the inherent power to

tax

Which of the following statement is not correct?

The prohibition of delegation by the state of the power

of tax will still allow the BIR to modify

Inherent limitation?

Tax must be for the public purpose

This is a constitutional limitation?

No appropriation of public money for religious purposes

Which of the following is not correct?

In the case of legally separated spouse
 25 to 28 are based on the following: Mr. Mark Tang is a partner of Tang Dayag Caiga Company, a business
partnership. He owns 25% interest. The gross sales of Tang Dayag Caiga Company amounted to
P10,000,000.00 for taxable year 2021. The recorded cost of sales and operating expenses of the
partnership were P2,750,000.00 and P1,500,000.00, respectively. It had also incurred an interest expense of
P200,000 in connection with asset acquisition and interest income from bank deposit amounting to
P100,000. The total assets of the partnership is P110,000,000.

1. How much is the taxable income of the partnership?

B a. P5,750,000 c. P5,550,000
b. P5,570,000 d. None of the choices

Gross sales P10,000,000

Less: Cost of sales 2,750,000
Gross income 7,250,000
Less: Interest expense 200,000
Reduction (20% x 100,000) (20,000) (180,000)
Other operating expenses (1,500,000)
Taxable income P5,570,000

2. How much is the income tax liability of the partnership?

B a. P1,725,000 c. P1,665,000
b. P1,392,500 d. None of the choices
Taxable income P5,570,000
Tax rate 25%
Tax due P1,392,500

For domestic corporation, effective July 1, 2020, the corporate income tax rate is 25%, However, it is 20%
if the net taxable income does not exceed P5,000,000 AND total assets does not exceed P100,000,000)
3. How much is the share in the partnership income of partner mark Tang?
B a. P1,068,750 c. P 978,775
b. P1,087,625 d. None of the choices

Taxable income of the partnership P5,583,000

Less: Income tax 1,392,500
Net income after tax 4,190,500
Add: Interest income, net of final tax (200,000 – (200,000 x 20%) 160,000
Distributable net income 4,350,500
Mark Tang’s interest in the partnership 25%
Partner’s interest in the partnership’s distributable income P1,087,625
4. Assuming the partnership avails of the Optional Standard deduction, how much is the tax liability of the partnership?
B a. P1,725,000 c. Zero
b. P1,087,500 d. None of the choices

Gross sales P10,000,000

Less: Cost of sales 2,750,000
Gross income 7,250,000
Less: Optional standard deduction (40% x 7,250,000) 2,900,000
Taxable income 4,350,000
Tax rate 25%
Tax due and payable P1,087,500
 36 to 38 are based on the following: In 2018, Ms. Glai Espenilla Bangug, a financial comptroller of EB
Company, earns annual compensation of P1,500,000, inclusive of 13th month and other benefits in the amount
of P80,000 and mandatory SSS contribution of P3,500 and Philhealth contribution of P2,000. Aside from her
employment income, she owns a convenience store, VATregistered, with gross sales of P3,000,000. Sales
discount amounts to P300,000; sales returns and allowances amount to P150,000. Her cost of sales and
operating expenses are P1,000,000 and P600,000 respectively and with non-operating income of P100,000.
Payments for the first three (3) quarters amount to P300,000.

4. Can she avail of the 8% income tax rate?

a. Yes, because her gross sales do not exceed the VAT threshold.

b. No, because she is VAT-registered.

c. Yes, because she is a mixed income earner.
d. No, because her total income including compensation income exceed the VAT threshold.

Unless the taxpayer signifies in the 1st Quarter Return of the taxable year the intention to elect the 8% income tax,
the taxpayer shall be considered as having availed of the graduated rates under Section 24(A) of the Tax Code, as
amended, and such election shall be irrevocable. He shall also be liable to business tax.

The following cannot avail of the 8% income tax rate option:

a. A VAT-registered taxpayer, regardless of the gross sales/receipts

b. Taxpayers who are subject to Other Percentage Taxes under Title V of the Tax Code, as amended, except
those subject under Section 116 of the same Title
c. Partners of a General Professional Partnership (GPP) by virtue of their distributive share from GPP Page 7 of 24
 The taxpayer is subject to 12% VAT based on her gross sales (P3,000,000 - 300,000 - 150,000 = 2,550,000 x 12% =
P306,000)

5. How much is her total taxable income?

C a. P2,913,500 c. P2,464,500
b. P2,550,000 d. None of the choices

Total compensation income P1,500,000

Less: Non-taxable 13th month and other
benefits 80,000
Mandatory SSS contribution 3,500
Mandatory Philhealth contribution 2,000 85,500
Taxable compensation income 1,414,500
Gross sales 3,000,000
Less: Sales discount ( 300,000)
Sales returns and allowances ( 150,000)
Net sales 2,550,000
Less: Cost of sales (1,000,000)
Gross income 1,550,000
Less: Operating expenses 600,000
Net income from operation 950,000
Add: Non-operating income 100,000 1,050,000
Total taxable income P2,464,500

4. How much is her tax due when she files her final tax return?
A a. P338,640 c. P482,320
b. P366,000 d. None of the choices

Total taxable income P2,464,500

Tax due Sec. 24 (A) 2,000,000 490,000
464,500 x 32% 148,640 P 638,640
Less: Payments, first 3 quarters 300,000
Tax payable P 338,640

lOMoARcPSD|9951700

Juan Dela Cruz, a non-vat registered lessor of residential and commercial units, had the following
data for the 1st and 2nd Quarters of 2020:

Gross
R eceipts
1st Quarter 2nd Quarter
Lease of Residential Units
• Monthly rental of P13,000/unit P2,500,000 P2,300,000
• Monthly rental of P18,000/unit 1,000,000 P1,200,000
Lease of commercial units 2,300,000 2,400,000
Input VAT from VAT suppliers 150,000 120,000
1. How much is the business tax due for the 1st quarter 2020 of Mr. Juan Dela Cruz?
A. P99,000 B. P174,000 C. P396,000 D. P246,000

2. How much is the business tax due for the 2nd quarter 2020 of Mr. Juan Dela Cruz?
A. P432,000 B. P312,000 C. P708,000 D. P108,000

3. Assuming Mr. Juan Dela Cruz is vat registered taxpayer instead of non-vat registered, how much is his business tax due for
the 1st Quarter of 2020?
A. P246,000 B. P546,000 C. P696,000 D. P396,000

4. How much is the business tax due for the 2nd quarter of 2020 of Mr. Juan Dela Cruz, assuming as a VAT registered at the
start of the 2nd Quarter 2020?
A. P432,000 B. P312,000 C. P708,000 D. P108,000

1. P3,300,000 x 12% = P396,000

2. P3,600,000 x 12% = P432,000
3. (P3,300,000 x 12%) – P246,00 P150,000 =
4. (P3,600,000 x 12%) – P120,000 = 0
P312,00
0

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