Cebu Institute of Technology – University

College of Management, Business, and Accountancy

ARC 414 – Taxation Review
Pre-final Examination

JUNALINE SAPARIYA
Instructor
Test I. Instruction: Determine whether the transaction belongs to:

A – VAT TRANSACTION
B – ZERO-RATED VAT
C – VAT-EXEMPT, OPT-EXEMPT
D – VAT-EXEMPT, SUBJECT TO OPT
E. TRANSACTIONS WITH GOVERNMENT UNITS

WRITE THE CORRESPONDING LETTER IN YOUR ANSWER SHEET. (20 pts)

A1. Purchase of imported products

D2. Sale of shares of stock through the stock market
D3. Non-VAT radio and TV broadcasting franchise grantees with gross receipts of 8,000,000 per year.
A4. Sale of Services to local air transport companies
A5. Sale of goods with annual gross sales of 2,000,000
D6. Transport of passengers by land
A7. Sale of commercial property amounting to 3,000,000
C8. Importation of supplies by international shipping business
A9. Sale of processed marine food products amounting to 2,500,000 per year
C10. Printing and publication of books
C11. Sales of agricultural food products in their original state
E12. Sales of services to Department of Finance
D13. Services rendered by professionals amounting to 720,000 per year
C14. Sales of duly registered cooperative
C15. Sale of residential house and lot amounting to 3,000,000
A16. Sale of residential lot amounting to 2,000,000
C17. Lease of residential unit with monthly rental of 10,000
D18. Gross receipts within for services by international shipping carriers
D19. Gross receipts for services rendered for overseas dispatch originating from the Philippines
E20. Gross receipts for services rendered to TESDA

Test II. Select the letter of the correct answer. (30 pts)

1. VAT is imposed only in the country where the goods or services are consumed. This principle would refer to
a. destination principle c. business tax principle
b. jurisdiction principle d. consumer principle

2. This kind of tax is imposed due to opportunity given to engage on sale, exchange, or barter of goods and services
a. ad-valorem tax c. consumption tax
b. privilege tax d. indirect tax

3. Which of the following rates can be used as rate for output and input VAT?
a. 12% b. 7% c. 5% d. 2%

4. Which of the following is not a characteristic of VAT?

a. tax on gross sales c. tax on sellers
b. tax on consumption d. tax on buyers

5. The following items is not part of the taxable base for VAT purposes, except
a. discounts that are expressly indicated in the invoice
b. sales return with proper credit or refund was made during the month
c. sales allowance with proper credit or refund was made during the month
d. cost of sales of the taxable goods sold

6. Which of the following is not considered a deemed sales?

a. installment sale of real property
b. merchandise inventory left upon retirement
c. distribution of inventory to creditors
d. consignment of goods if not sold within 60 days

7. Which of the sale of real property inventory is subject to VAT?

a. low-cost housing with sale price of 375,000 per unit
b. socialized housing with sales price of 150,000 per unit
c. residential lot valued at 2,000,000
d. residential house and lot value at 2,500,000

8. Upon full collection of installment sale of real property, there is an additional VAT if the
a. zonal value is higher than market value
b. market value is higher than zonal value
c. total collection is higher than zonal value or market value
d. zonal value or market value is higher than the total collection

9. Transfer of amounts retained by the contractee to the account of the contractor is an example of:
a. actual receipts c. advanced collection
b. installment collection d. constructive receipts

10. Which of the following non-VAT business is required to register under VAT system within 30 days upon
reaching the threshold amount?
a. trading business
b. common carrier business
c. franchise grantees of radio/television broadcasting
d. agricultural food products in original state

11. Which of the following services may be subject to VAT?

a. Hospital services
b. TESDA-registered educational services
c. Professional services
d. Employee’s services

12. The amount of sales to a VAT-registered person which requires that the sales invoice should contain the
customer’s name, address and TIN.
a. 5,000 or more c. 2,000 or more
b. 3,000 or more d. 1,000 or more

13. X is a VAT-registered professional business with the following reports during the year:
Collections from clients including VAT 4,480,000
Billings including VAT 1,680,000
Supplies used including VAT 560,000
Importation of equipment including VAT 112,000
The net VAT payable would be
a. 600,000 b. 480,000 c. 420,000 d. 408,000

14. A VAT person reported the following during the year:

Export sales, Peso denominated 2,000,000
Export sales, Dollar denominated (peso equivalent) 1,000,000
Importation of goods 500,000
Its zero-rated transactions would be
a. 3,500,000 b. 3,000,000 c. 1,000,000 d. none

15. Which of the following sale is not an export sale?

a. sale of goods from foreign country to the Philippines
b. sale of gold to the Bangko Sentral ng Pilipinas
c. sale of goods to PEZA-registered/Ecozone export enterprise
d. sale of locally manufactured goods to foreign country

16. One of the following is not a major business internal revenue tax in the Tax Code.

a. Value-added tax c. Income tax

b. Excise tax d. Percentage tax

17. The account title to best reflect the value-added tax on a purchase:
a. Sales tax payable c. Input tax
b. Value-added tax payable d. Output tax

18. Charlie is an operator of parking lots. What business tax is due on his income from the business?

a. Broker’s tax c. Caterer’s tax

b. Common carrier’s tax d. value-added tax

19. Gross receipts tax (GRT) is a business tax paid by a:

a. Hotel operator c. Franchise holder

b. Insurance company d. Bank

20. Three (3) of the following are exempt from the value-added tax. Which is the exception?

a. Sales or importation of medical, dental and veterinary medicines

b. Services rendered by persons subject to percentage tax
c. Receipts from leasing of real properties
d. Export sales by persons who are not value-added tax registered.

Answer: a or c

21. The following are data, VAT not included, of Country Appliances Marketing Co. for the last quarter of 2006:

Sales up to December 15, total invoice value P300,000

Purchases up to December 15 200,000

Additional information:

On December 16, 2006, the country Appliances Marketing Co. retired from its business and the inventory
valued at P190, 000 net of input taxes was taken and transferred to New World Appliances Co. There is a deferred
input taxes from the third quarter of P3, 500.

How much is the total value added taxes due and payable by Country Appliances Marketing Co. in its
operations in the last quarter and its retirement from business?

a. P12,000 b. P8,500 c. P34,800 d. P31,300

22. Which statement is wrong? Transactions considered “in the course of trade or business”, and therefore subject
to the business taxes include:

a. Regular conduct or pursuit of a commercial or an economic activity by a stock private organization

b. Regular conduct or pursuit of a commercial or an economic activity by a non-stock, non-profit private organization
c. Isolated services in the Philippines by non-resident foreign persons
d. Isolated sale of goods or services for a gross selling price or receipts of P800, 000

23.Which statement is considered correct?

a. An excise tax which imposes a tax based on weight or volume capacity or any other physical unit of measurement
is called specific tax
b. An excise tax which imposes a tax based on selling price or other specified value of the article is called ad valorem
tax
c. A percentage tax which is imposed whether the transaction resulted in a gain or loss is called transaction tax
d. All of the above

24. Mr. A imported cigarettes from the United States for sale. At a later date, he sold the cigarettes in the Philippines.
He is subject to the value-added tax. He is also subject to the business tax of:

a. Excise tax b. income tax c. Percentage tax d. none of the above

25. Mr. B is a dealer of liquors. On his sales in the Philippines, his tax is:

a. Excise tax b. Value-added tax c. Percentage tax d. none of the above

26. Mr. C is a manufacturer of fermented liquors. In making sales, all taxes on the products and transactions are
passed on to the buyers. For purposes of the value-added tax, which of the three taxes mentioned here that he pays
forms part of the gross selling price?

a. Excise tax b. Value-added tax c. Percentage tax d. none of the above

27. Mr. D is a civil engineer who pays the occupation tax under the local Government Code. He is also a building
contractor. The tax that he should pay is

a. Excise tax b. value-added tax c. Percentage tax d. none of the above

28. Mr. F is a lessor of real property and personal property (cars). The tax that he pays

a. Excise tax b. Value-added tax c. Percentage tax d. none of the above

29. Statement 1: A person subject to excise tax is also subject to value-added tax.

Statement 2: A person subject to percentage tax is also subject to value-added tax.

a. Both statements are correct

b. Both statements are wrong.
c. The first statement is correct but the second statement is wrong.
d. The first statement is wrong but the second statement is correct.

30 Which of the following is not a sale and therefore is not subject to the value-added tax?

a. Transfer, use or consumption not in the ordinary course of the business of goods or properties ordinarily intended
for sale or use in the course of business
b. Distribution or transfer to shareholders or investors of share in the profits of a VAT-registered person
c. Distribution or transfer to creditors in payment of debt
d. Consignment sales

31. Which statement is correct? The value-added tax on goods or properties sold:

a. Is based on gross sales and not on net sales

b. May be due even if the goods or properties were not actually sold
c. Is not imposed on goods exported
d. Is a selling expense of the trader.

32. Under the value-added tax law, which of the following sales may not be zero-rated?

a. Export sales
b. Foreign currency denominated sales.
c. Sales of goods to the Asian Development Bank
d. Sale of goods to an export-oriented enterprise

33. Which of the following statement is wrong: The value-added tax is:

a. Not an expense
b. A tax credit
c. Not a part of the gross selling price
d. On purchases, is a part of the cost of inventory.

34. Which of the following are not account titles with balances in the books of accounts of a VAT taxpayer?

a. Output taxes c. Excess input taxes carry-over

b. Input taxes d. VAT payable

35. The formula: Output taxes (less) Input taxes (equals) Value-added tax payable means that:

a. Value-added taxes are not deductible from gross income

b. Value-added taxes paid o purchases are prepayments
c. Value-added taxes during a taxable period may not appear in the financial statements
d. All of the above statements are correct.

36. All amounts given are VAT not included:

A, Non-VAT taxpayer, sells to B, VAT taxpayer P 60,000

B, VAT taxpayer, sells to C, VAT taxpayer 90,000
C, VAT taxpayer, sells to D, VAT taxpayer an exporter 150,000
D, VAT taxpayer, exports 300,000

The value-added tax of B:

a. Payable of P10,000 c. Payable of P10,800

b. Payable of P9,200 d. Payable of P7,200

37. Which statement is wrong?

a. There is a transitional input tax on sales of goods or properties

b. There is a transitional input tax on sales of services
c. There is a presumptive input tax on sales of goods or properties
d. There is a presumptive input tax on sales of services

38. Sarap products is a processor of refined sugar. It purchases sugarcane from farmers for processing into
intermediate stages until it becomes refined sugar. In a month it had the following sales and purchases, no tax
included:

Sales P880,000
Purchases of sugarcane 220,000
Purchases of containers and paper labels 100,000

The value-added tax payable is:

a. P66,000 b. P88,000 c. P74,700 d.P84,800

39. The Tops Merchandising Company had the following data on operations for a month as a VAT-registered
taxpayer:
Sales, total invoice price P581,900
Purchases of goods, VAT not included:
From VAT registered persons 100,000
From Non-VAT registered persons 80,000
Purchases of services, VAT not included:
From VAT-registered persons 20,000
From Non-VAT registered persons 8,000
From persons subject to percentage taxes 10,000
Salaries of employees 60,000
Other operating expenses 12,000

This is the first month of being liable to the value-added tax. Data on inventories (VAT not included) at the beginning
of the period follow:

Inventory, at cost P 40,000

At net realizable value 30,000
Value-added tax paid on beginning inventory 4,800

Input taxes are:

a. P43,790 b. P21,800 c. P19,200 d. P29,000

40. Mr. C is VAT-registered person, with the following data for a taxable month, VAT not included: Sales, domestic,
to consumers- P600, 000; Sales, direct exports- P300, 000; Purchases, total invoice cost, from VAT-registered
persons: Of goods of P550, 000 and of services of P300, 000.

The sales subject to the value-added tax is:

a. P600,000 b. P400,000 c. P300,000 d. P900,000

41. The Pastry Shop sells cakes and pastry items to well-known hotels around the Metro Manila area. The hotels are
allowed credit based on the track record of the hotels. The total amounts received or receivable from sales by the
Pastry Shop in April of Year X were P220, 000, including the value-added tax. 75% of the sales are normally on
account.

How much is the value-added tax on the sales amount for the month of April, Year X?

a. P22,100.52 b. P21,050.35 c. P16,520.32 d. P23,571.43

42. In a month, VAT not included:

Domestic sales P 660,000

Export sales 1,500,000
Purchases from VAT-registered persons:
Of goods exported 550,000
Of goods sold in the Philippines 220,000
Operating expenses 110,000

The input taxes attributable to export sales which may be refunded or credited against any other internal revenue
tax including the any value-added tax on domestic sales:

a. P50,000 b. P20,000 c. P70,000 d. P66,000

43. Analysis of the balances in selected accounts of a taxpayer, with VAT and non-VAT business, showed (Gross profit
is 60% of the selling price. There were no inventories at the beginning and end of the taxable period):

Purchases, all form VAT-suppliers, VAT not included P1,600,000

Sales, any tax not included:
Exports, VAT business 2,000,000
Exports, non-VAT business 1,000,000
Domestic sales, VAT business 600,000
Domestic sales, Non-VAT business 400,000

The net value-added tax refundable for the month:

a. P36,000 b. P52,800 c. P100,000 c. P60,000

44. Data for a trader with one line of business subject to the value-added tax and another line of business not subject
to the value-added tax:

Sales, VAT business, VAT included P1,008,000

Sales, Non-VAT business 100,000
Purchases of goods, VAT business, VAT included 224,000
Purchases of goods, Non-VAT business, VAT included 33,600
Purchase of depreciable asset, for use in VAT and
Non-VAT business, VAT included 112,000
Purchases of supplies, for VAT and Non-VAT business,
VAT included 2,240
Rental of premises, for VAT and Non-VAT business, from
Non-VAT registered person 22,000

The value-added tax payable is:

a. P72,984 b. P70,000 c. P90,000 d. P59,800

45. Robin P. imported a car from the U.S.A. for his personal use. Total landed cost is P250, 000 (about U.S. $10, 000)
including customs duties of P50, 000. VAT payable is:

a. P27,500 c. P20,000
b. P10,000 d. None, because the importation is personal use
46. An importer wishes to withdraw its importation from the Bureau of Customs. The imported goods were subjected
to a 10% customs duty in the amount of P12, 500 and to other charges in the amount of P9, 500. The value added
tax due is:

a. P12,500 b. P13,750 c. P13,364 d. P17,640

47. The following data pertain to a value-added taxpayer for November, 2006:

Sales, total invoice price P896,000

Local purchases from a VAT supplier, total invoice cost 268,800

In October, there was an importation of goods to be sold, with a landed cost of P200, 000. There were no sales in
October.

The value-added tax payable for November:

a. P80,000 b. P43,200 c. P36,000 d. P56,000

48. Which statement is correct? The value-added tax on an importation:

a. Should be paid by the tax-exempt importer, if he subsequently sells the goods to a non-tax-exempt purchaser
b. Should be paid by the non-tax-exempt purchaser to whom the tax-exempt importer sells it
c. Is a liability either of the tax-exempt importer or the non-tax-exempt purchaser;
d. Shall not pay the value-added tax because the transaction was exempt at the point of importation

49. Which statement is wrong?

a. The percentage taxes are basically on sales of services

b. The percentage taxes are paid monthly
c. The percentage taxes are not allowed by law to be shifted to the customers or clients
d. An isolated transaction not in the course of business will not result in a liability for a percentage tax.

50. Which of the following is not true? The percentage tax:

a. Is a tax on a sale of services;

b. May be imposed on a sale of goods
c. May be imposed together with the value-added tax
d. May be imposed together with the excise tax

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