Naga College Foundation, Inc.

COLLEGE OF BUSINESS AND ACCOUNTANCY

Member: Philippine Association of Collegiate Schools of Business (PACSB)
PACUCOA Level 2 Re-accredited Business Programs

Instructions: (Three (3) hours)

 Read the information carefully.
 Shade the letter that corresponds to your answer.
 Use any portion of the questionnaire to show your computation.

TAXATION
1. One of the following corporations cannot claim tax credit for foreign taxes paid abroad
a. Private educational institutions
b. Resident international carriers
c. Investment companies
d. Domestic hospitals

2. Statement 1: Foreign income tax may be treated by a corporate taxpayer as tax credit but not as
deduction from gross income.
Statement 2: Being a holding company is conclusive evidence of improper accumulation of profit.
a. True, True c. False, True
b. False, False d. True, False

3. The Improperly Accumulated Earnings Tax shall not apply to the following, except:
a. Insurance companies
b. Corporations formerly registered with PEZA
c. Publicly held corporations
d. Banks and non bank financial intermediaries

4. It is a test used in determining the reasonable needs of a business to justify the accumulation of
earnings which will exempt the corporation from paying IAE
a. Urgency test c. Immediacy test
b. Reasonable needs test d. Control test

5. The IAE tax is essentially a

a. General tax c. Regulatory/penalty tax
b. Property tax d. Excise tax

6. Statement 1: MCIT shall apply to all corporations.

Statement 2: IAET shall apply only to Domestic Corporations.
a. True, True c. False, True
b. False, False d. True, False

7.
13 14 15 16
Gross Sales 2,040,000 2,800,000 3,000,000 4,000,000
Sales Returns 40,000 100,000
Cos of Goods 1,000,000 700,000 1,500,000 1,500,000
Sold
Business 950,000 2,100,000 1,200,000 1,200,000
expenses
 The income tax due after tax credit, if any for taxable year 2015
a. 15,000 c. 60,000
b. 40,000 d. 90,000

8. The following corporations are exempt from the Minimum Corporate Income tax, except:
a. Non-profit hospitals
b. Proprietary educational institutions
c. Non-stock, non-profit educational institutions
d. Resident corporations

9. Which of the following is not exempted from Improperly Accumulated Earnings Tax?
a. Publicly-held corporations
b. Bank and other non-bank financial intermediaries
c. Insurance companies
d. Resident corporations

10. Aragon, Inc. had the following items of income and expenses:
Gross receipts 500,000
Cost of services, salary of personnel
Directly engage in business 250,000
Dividends received 25,000

The dividends were received from a domestic corporation. The general and administrative expenses
include cost of utilized facilities, cost of supplies of 25,000 and 15,000, respectively.
What amount should be reported as gross income for minimum corporate income tax purpose?
a. 210,000 c. 250,000
b. 235,000 d. 275,000

11. Williams, a domestic corporation had the following data:

Taxable year Gross Income Deductions
2015 1,000,000 1,100,000
2016 980,000 500,000

The income tax payable in 2015 is:

a. 20,000 c. 380,000
b. 0 d. 100,000

12. Assuming in problem number 21. The taxable income in 2016 is:
a. 380,000 c. 100,000
b. 0 d. 50,000

13. Assuming the same problem in number 21. The income tax payable for 2016 is:
a. 153,600 c. 114,600
b. 144,000 d. 94,000

14. Non-resident lessors of aircraft, machineries and other equipment are taxed on gross rentals,
charter and other fees at
a. 2.5% c. 7.5%
b. 5% d. 10%

15. Non-resident owner or lessor of vessels chartered by Philippine nationals are taxed on gross
rentals, lease or fees at
a. 4.5% c. 7.5%
b. 5% d. 10%
16. One of the following does not form part of gross income
a. Interest
b. Royalties
c. Annuities
d. Gift, bequest, and devises

17. Cash dividend received by a non-resident corporation from a domestic corporation is

a. Exempt from income tax
b. Subject to final tax
c. Part of taxable income
d. Partly exempt, partly taxable

18. Cash dividend received by a domestic corporation from a domestic corporation is

a. Exempt from income tax
b. Subject to final tax
c. Part of taxable income
d. Partly exempt, partly taxable

19. Shares, obligations or bonds issued by a foreign corporation shall be considered as intangible
personal property situated in the phils if how many percent of its business is located in the phils?
a. 33% c. 75%
b. 50% d. 85%

20. Any amount subsequently received on account of a bad debt previously charged off and allowed as
a deduction from gross income for prior years must be included in gross income for the taxable
year in which received. This is
a. End-result doctrine
b. Destination of income test
c. Severance theory
d. Equitable doctrine of tax benefit

21. A was selected as the most outstanding teacher in her region. Her name was submitted by the
school principal without her knowledge. She received a trophy and a cash award of 15,000
a. Taxable income
b. Subject to final tax
c. Exempt from income tax
d. Partly taxable, partly exempt

22 to 23. In 2018, Dean Rolly, professor of accounting in one university, earned annual compensation
of P900,000, inclusive of 13th month and other benefits in the amount of P120,000 but net of
mandatory contributions to SSS,Philhealth and Pag-IBIG. Aside from employment income, he practices
his profession as a CPA, with gross receipts of P2,200,000. His cost of services and other operating
expenses amounted to P600,000 and P250,000, respectively, and with non-operating income of
P100,000.

Compute:

22. total income tax due if he opted to be taxed at 8%

a. 350,000
b. 340,000
c. 317,000
d. 315,000
 23. total income taxdue if he opted to be taxed at the graduated rates.

a. 573,200
b. 550,000
c. 473,200
d. 500,000

24. In 2018, Mr. Boquiren is earning an annual compensation of P400,000, inclusive of 13 th month and
other benefits in the amount of P120,000. Aside from employment income, he owns a fruit and vegetables
farm with gross sales of P3,500,000. His cost of sales and operating expenses are P1,000,000 and
P600,000, respectively, and with non-operating income of P100,000.Compute for the inclome tax and
business tax due.

a. 589,200; VAT
b. 589,200; OPT
c. 569,200; VAT
d. 569200; OPT

25 to 26. In 2018, the company gave fringe benefits to its employees. The amount of benefit received by
employee France is P32,500. The total amounts given to rank-in-file employees amounted to P40,000.

25. How much is the fringe benefit tax if France is a supervisory employee?

a. 17,000
b. 17,500
c. 16,000
d. 16,500

26. How much is the deductible expense on the company?

a. 90,000
b. 60,000
c. 118,000
d. 180,000

27. After working for 30 years. Rita retired from employment in December 2018 as an accountant of Nail
Corporation. As a consequence of her retirement due to old age, she received the following from his
employer:

Monthly salary(until December 15) P30,000

13TH Month pay 30,000
Cash gift 5,000
Retirement pay 750,000
Terminal leave pay 120,000
Longetivity pay 30,000
Rice allowance per month 2,500
Clothing allowance 8,000
Loyalty award 20,000

How much is the taxable compensation income of Rita in 2018?

a. 345,000
b. 300,000
c. 348,000
d. 390,000
28 to 29. EE operates a sari-sari store while she is engaged in tax practice. In 2018, her gross sales
amounted to P1,800,000. In addition to her gross receipts from tax practice of P400,000. Her recorded
cost of goods sold and operating expenses were P1,325,000 and P320,000, respectively.

Compute for the income tax due on EE if:

28. She availed of Optional Standard Deduction.

a. 286,000
b. 280,000
c. 380,000
d. 370,000

29. If she signifies her intention to be taxed at 8% income tax rate in her 1 st quarter return

a. 156,000
b. 166,000
c. 180,000
d. 122,000

30. Mr. FF is a partner of Certified Tax Practitioners, a general professional partnership, and owns 25%
interest. The gross receipts of Certified Tax Practitioners amounted to P10,000,000 for taxable year 2018.
The recorded cost of service and operating expenses of CTP were P2,750,000 and P1,500,000,
respectively.

Income tax liability on the share of FF in the net income of the partnership

a. 321,250
b. 311,250
c. 319,250
d. 331,250

31 to 36. Compute the amount of business tax each listed case and indicate the type of tax whether OPT
or VAT (e.g 20,000 VAT or 20,000 OPT)

Mr. A, an accountant, owns a small grocery. During the taxable year, he had the following gross receipts:

Option 1- 8% of gross sales/receipts

Option 2- graduated rates

TY GROSS SALES GROSS REC COST OF SALES/ ELECTED OPTION INC.TD

-GROCERY -PROFESSION SERVICES
31. 2017 P1,000,000 P600,000 P450,000 2 333,000
32. 2018 1,800,000 500,000 630,000 1 164,000
33. 2018 2,000,000 400,000 1,300,000 1 172,000
34. 2018 2,500,000 750,000 1,200,000 2 506,000
35. 2018 2,600,000 1,100,000 2,450,000 2 265,000
36. 2018* 1,200,000 250,000 860,000 2 77,500

*failed to indicate signify intention to be taxed at 8%

Ms. CC Is an accountant who is engaged in public practice. Her total gross receipts amounted to P4,250,000 for taxable year 2018.
Her recorded cost of service and operating expenses were P2,150,000

And P1,000,000, respectively.

37. How much is the income tax due on Ms. CC?
a. 200,000
b. 300,000
c. 234,000
d. 220,000
38. What business tax is due on her?
a. OPT
b. VAT
c. EXCISE TAX
d. LOCAL TAX
39. How much is the tax due if she availed of the optional standard deduction?
a. 666,000
b. 650,000
c. 664,000
d. 754,000
40. In 2018, Mama Sang owns a videoke bar with gross receipts of P2,500,000. Her cost of sales and operating expenses are
P1,000,000 and P600,000, respectively, and with non-operating income of P100,000. How much is the income tax due and
business tax due?
a. 190,000;450,000
b. 190,000;500,000
c. 180,000;450,000
d. 180,000;500,000

LAW
1. Non-compliance with this kind of obligation gives a right of action to compel performance.
A. Natural Obligations C. Moral Obligations
B. Civil Obligations D. All of the choices

2. Fluffy Iglesias is indebted to Marisol for P100,000. The debt became due and no payment was made by Fluffy.
Eventually, the right of action prescribed before Marisol can initiate any court proceedings to compel
performance. However, out of his own conscience, Fluffy eventually paid the P100,000. In this case,
A. Fluffy can ask for the return of the P100,000 since the debt already prescribed.
B. Fluffy can ask for the return of the P100,000 on the ground of solution indebiti.
C. Fluffy cannot ask for the return of the P100,000 since Marisol has the right to retain payment. D. Fluffy cannot
ask for the return of the P100,000 since ownership passes upon delivery of the same.

3. When the debtor binds himself to pay when his means permit him to do so, the obligation is deemed:
A. Subject to a suspensive condition
B. Subject to a resolutory condition
C. One with a suspensive term
D. One with a resolutory term
4. On June of 2020, S promised to sell to B, his house and lot, rented by another, should B pass the CPA Board Exams.
B took and passed the October 2020 Board Exams. Who would be entitled to the rent from the time S promised
to sell to Rochelle until the happening of the suspensive condition?
A. B, since the happening of the condition retroacts to the day of the constitution of the obligation.
B. S, because he is the owner of the house and lot during the time mentioned
C. B, because the obligation is unilateral and S is required to appropriate the rents in favor of Rochelle
D. S, because the obligation is reciprocal, thus the fruits are deemed mutually compensated

5. W, X, Y, Z are solidarily indebted to C for P40,000. When C demanded payment from W, the latter raised the
following defenses: X is a minor, Y’s share was already condoned and that Z is insolvent. How much is W required
to pay C?
A. P40,000 C. P20,000
B. P30,000 D. P10,000

6. A potestative suspensive condition solely dependent on the will of the debtor:

A. Does not affect the validity of the obligation
B. Makes the obligation voidable
C. Makes the obligation void
D. Is void and thus the obligation is treated as a pure obligation

7. Which of the following can validly give consent to a contract:

A. Insane persons C. Demented persons
B. Minors D. Deaf-mutes who are blind

8. A promised to deliver to B his car if the latter passes the October 2020 CPA Board Exam. On June 15, 2020, A
changed the tires of the car to a more expensive brand. B passed the CPA Board Exam, in this case:
A. A would be entitled to reimbursement for the cost of the tires with the right to withhold delivery
B. A can withhold delivery until he is paid the cost of the tires
C. A can remove the tires if he is not paid the cost of the tires even if it causes damage to the car
D. A can only remove the new tires provided it will not cause damage to the car

9. D is indebted to C for P100,000 secured by a mortgage executed by M on his lot and a guaranty by G. Which of
the following is false if M offers to pay the loan?
A. C can be compelled to accept the payment
B. M will be subrogated to the rights of C after payment is made
C. M can later on collect from G if D fails to pay M
D. If it turns out that D already paid half of the loan, M can only collect P50,000

10. D promised to deliver to C his car worth P250,000, his laptop worth P80,000 or his diamond ring worth P40,000.
All the objects were lost in the order they were mentioned through the fault of D. Which of the following is
correct?
A. D is liable for P250,000, the value of the car
B. D is liable for P80,000, the value of the laptop
C. D is liable for P40,000, the value of the ring D.
D is liable for the value of whatever C chooses
11. A contract of loan was entered into where A, B, C, D and E are individually liable for P100,000 to X and Y, joint
creditors. Which of the following is correct?
A. X can demand the whole P100,000 from any one of A, B, C, D and E.
B. Y can demand only P20,000 from A, B, C, D and E, separately.
C. A may be compelled to pay P50,000 to either X or Y.
D. B may be compelled to pay P10,000 by either X or Y

12. X, crossing a pedestrian lane, did not see that the light was red. He was hit by a car driven by Z. In this case,
A. Z is not liable for damages since X was himself negligent in crossing the street
B. Z’s liability can be reduced due to the contributory negligence of X
C. X’s negligence was the direct and proximate cause of the injury
D. X can recover damages since he was not negligent

13. An action for annulment of a sale of registered land on the ground of fraud would prescribe in 4 years from:
A. Date of sale C. Registration of the sale
B. Discovery thereof D. Delivery

14. Which of the following contracts cannot be ratified?

A. Those whose cause or object did not exist at the time of the transaction
B. Unauthorized contracts
C. Those where one party is incapable of giving consent
D. Those that fail to comply with the Statute of Frauds

15. A orally sold his cellphone to B for P15,000, where the latter paid P499 down-payment and the balance to be paid
30 days after. The contract entered into is:
A. Valid and enforceable C. Void
B. Rescissible D. Unenforceable

16. Statement 1: Every contract of partnership having a capital of two thousand pesos or more, in money or property,
shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange
Commission.

Statement 2: A contract of partnership is voidable, whenever immovable property is contributed thereto, if an

inventory of said property is not made, signed by the parties, and attached to the public instrument.

a. Only the first statement is correct.

b. Only the second statement is correct.
c. Both statements are correct.
d. Both statements are incorrect.

17. Statement 1: In all cases, a partnership begins from the moment of the execution of the contract.
Statement 2: Every partner is a creditor of the partnership for whatever he may have promised to contribute
thereto.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. Both statements are incorrect.
18. Articles of universal partnership, entered into without specification of its nature, only constitute
a_______________.
a. Universal partnership of all present property
b. Universal partnership of profits
c. Limited partnership
d. General partnership

19. Mr. X personally owe P10,000 to Mr. A, the managing partner in charge for collection of ABC Partnership. On the
other hand, Mr. X owe P30,000 to the partnership. When both debts are due, Mr. X paid P8,000 to Mr. A, with the
latter issuing a receipt under his name. How much of the P8,000 should go to Mr. A, if any?
a. P8,000 c. P6,000
b. P2,000 d. 0

20. A (60% ownership interest), B (15%), C (15%), and D (10%) are partners in ABCD. All of them were designated as
managing partners in the firm. During a meeting of the partnership, they were discussing a possible expansion of
the business. A chose Cebu as the next expansion area of the business, while B, C and D chose Davao. Applying
the rules of Article 1801, which would prevail as the next expansion site of the business?
a. Cebu c. Davao
b. Manila d. None of the above

21. ____________________are those who compose a corporation, whether as stockholders or shareholders in a stock
corporation or as members in a nonstock corporation.
a. Corporators c. Incorporators
b. Promoters d. Underwriters

22. No-par value shares must be issued for a consideration of at least

a. Five pesos per share c. One peso per share
b. Ten pesos per share d. One hundred pesos per share

23. Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter
stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees
and the vote or written assent of the stockholders representing at least _______ of the outstanding capital stock,
without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code.
a. 1/3 c. ½
b. 2/3 d. ¾

24. If a corporation has commenced its business but subsequently becomes inoperative for a period of at least
________ consecutive years, the Commission may, after due notice and hearing, place the corporation under
delinquent status.
a. Three c. Five
b. Ten d. Twenty

25. In the absence of any provision in the bylaws fixing their compensation, the directors or trustees shall not receive
any compensation in their capacity as such, except for reasonable ________.
a. Honorariums c. Talent fee
b. Per diems d. None of the above
26. Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation
or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal
or pecuniary interest in conflict with their duty as such directors or trustees shall be liable ______________ for all
damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
a. Jointly c. Jointly and severally
b. Solidarily d. Both B & C

27. The owners of _________ of the outstanding capital stock may delegate to the board of directors the power to
amend or repeal the bylaws or adopt new bylaws.
a. ½ c. Majority
b. 2/3 d. ¾

28. Regular meetings of stockholders or members shall be held annually on a date fixed in the bylaws, or if not so
fixed, on any date after ______ of every year as determined by the board of directors or trustees.
a. January 15 c. March 15
b. April 15 d. December 15

29. Statement 1: Preferred shares of stock may be issued only with a stated par value.
Statement 2: A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. Both statements are incorrect.

30. Statement 1: The board of the following corporations vested with public interest shall have independent directors
constituting at least thirty percent (30%) of such board.

Statement 2: Immediately after their election, the directors of a corporation must formally organize and elect: (a)
a president, who must be a director; (b) a treasurer, who must be a citizen; (c) a secretary, who must be a citizen
and resident of the Philippines; and (d) such other officers as may be provided in the bylaws.

a. Only the first statement is correct.

b. Only the second statement is correct.
c. Both statements are correct.
d. Both statements are incorrect.

31. Which of the following is an incorrect requisite for a bill of exchange to be negotiable:
A. The instrument is in writing and signed by the maker
B. The instrument contains an unconditional order to pay a sum certain in money
C. The instrument is payable on demand, or at fixed or determinable future time
D. The instrument is payable to order or bearer
32. M issued a promissory note in favor of P and authorized the latter to fill-up the note for P10,000. P, however, put
the amount P20,000 and negotiated the same to A. Which of the following is true?
A. M is not liable to A because he can validly raise the defense that the instrument was completed in breach of
the authority given
B. M is liable to A for P10,000 if A is a holder in due course
C. A can only collect P10,000 from P if he is not a holder in due course
D. A can collect P20,000 from M if he is a holder in due course

33. Which of the following is a negotiable instrument?

A. Pay P or order P10,000 on May 15, 2021 sgd. D
B. I promise to pay X or bearer P200,000 in two equal installments sg d. M
C. I promise to pay X P50,000 upon the death of X sgd. D
D. Pay to bearer P20,000 sgd. M to D

34. Which of the following is not negotiable?

A. I promise to pay to the order of B P10,000 in 5 equal monthly installments due at the end of each month from
issuance. However, if I miss one installment, the whole remaining amount shall become due and demandable.
Sgd. A
B. I promise to pay B or order P10,000 or deliver 5 sacks of rice. Sgd. A
C. I promise to pay bearer P10,000, 60 days from issuance, subject to a one-month extension at the option of the
maker. Sgd. A
D. I promise to pay B or bearer P10,000 with 6% interest. Sgd. A

35. James borrowed P10,000 from Cristopher as evidenced by a promissory note. The note complied with all the
requisites of negotiability, except that James did not affix his usual signature thereon as he was very ill at the time
he prepared the instrument. James wrote “X” on the space intended for the signature of the maker. In the
instrument negotiable?
a. No, the law requires the full signature of the maker before the instrument will be considered negotiable
b. No, the law requires that at least the surname of the maker be placed in the instrument
c. Both A and B
d. Yes, the “X” mark is sufficient to make the instrument negotiable.

36. “I promise to pay X or order the P1,000 out of the proceeds of the sale of my house. (Signed) Y”

“I promise to pay Y or order the sum of P10,000 as soon as my means permit me to do so. (Signed) X”
a. Both instruments are negotiable
b. Both instruments are not negotiable
c. Only the first instrument is negotiable
d. Only the second instrument is negotiable
37. How do you treat a negotiable instrument that is so ambiguous that there is doubt whether it is a bill or a note?
a. The holder should treat it as a bill of exchange
b. The holder should treat it as a promissory note
c. The holder may treat it either as a bill of exchange or a promissory note, at his election
d. None of the above
38. This test mandates that the entirety of the marks in question must be considered in determining confusing
similarity.
a. Dominancy Test c. Holistic Test
b. Idem Sonans Test d. None of the above

39. Two or more _________ can be named in the alternative:

A. Payees C. Indorsees
B. Drawees D. All of the above

40. M made a promissory note payable to A or bearer, for P10,000. A indorsed the note to B. It was stolen by F, who
forged B’s signature, when it was negotiated to C, C then delivered the note to H, the current holder. Which of
the following is true?
A. M cannot be made liable on the instrument since he is a party prior to the forgery.
B. A is liable to H since he can validly trace his title through A’s indorsement.
C. A loses equity on the instrument if H is a holder in due course.
D. If H is not a holder in due course, M, A and B can validly raise the defense of nondelivery of a complete
instrument

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