Business Taxes Problems

PROBLEMS ON BUSINESS TAXES

1. The net sales of Leopard Marketing in any year never exceeded P550,000. The
following information are also available:
Inventory, January 1, 2003
P -0Gross sales, January, 2003
160,000
Sales returns and allowances
7,000
Sales discounts
3,000
Purchase price, from VAT suppliers, of goods sold, VAT included
66,000
Required: Compute the following:
a. Percentage tax on the sale of the month?
b. If the taxpayer opted to be a VAT taxpayer effective January 1, 2003,
the value-added tax payable for the month?
2. The Metropolitan Electric Co., Inc. is a holder of a franchise to sell electricity. In a
particular month, it had gross receipts of P1,000,000 for the sale of electricity. Its
building had an auditorium and theater which it rents out. For the same month, the
auditorium and theater had gross receipts of P200,000:
Required: Compute the franchise tax.
3. Mrs. Simple Lang operates domestic carriers in the City of Dagupan. The following
receipts during the first quarter of 2004 were reported:
From ten (10) taxi units
From Five (5) bus units with 60 seating capacity
Twenty (20) units of jeepneys

P24,000
40,000
50,000

Assuming receipts were evenly distributed to individual units of common carrier,

compute the percentage tax to be paid by Mrs. Lang during the first (1st) quarter.
4. Barbosa Lines operates 15 buses with a capacity of 45 passengers, plying the route
from Cavite City to Las Pias City. The total gross receipts during the quarter
amounted to P150,000.
Questions:
a. How much common carriers tax is payable by Barbosa Lines?
b. Assuming instead that the quarterly gross receipts amount to P88,000 only,
how much percentage tax should the company pay?
5. FPJ is a television broadcasting company. Its gross receipts during the preceding
year amounted to P9,500,000.
Required:
a. Assuming the actual quarterly gross receipts amounted to P2,000,000, how
much percentage tax should FPJ pay?
b. How about if the gross receipts during the preceding year totaled to
22,000,000?
c. What if the franchisee is other than radio and/or television broadcasting
company or electric, gas and water utilities and the gross receipts amounted
to P7,500,000?
6. Rochelle Telephone Co. is engaged in selling telephone services to the public. Raul
Punzalan availed of Rochelles services by calling her girlfriend in China. He paid
P5,000 for thirty minutes call.
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Business Taxes Problems

Question: How much is the overseas communication tax? What if the long distance
call is made to his sister in Cebu?
7. The Philippine Bank of Accountants (PBA) realized during the last quarter of 2004 the
following interest from lending activities:
Short term maturing instruments
P200,000.
Medium term maturing instruments
100,000.
Long term, not over 7 years, maturing instruments 150,000.
Long term, over 7 years, maturing instruments
50,000
Required: Compute PBAs gross receipts (percentage) tax (GRT).
8. Cigu Rista insured his life with Tiyak Yewn Insurance Co. The total premium paid
was P60,000. Out of this amount, P48,000 was paid in cash and the balance in
promissory note.
Question: How much is the tax on life insurance premiums?
9. Carrie Rista operates a racetrack. Other than the restaurant it operates, it also
allows the Gloriants to sell foods inside its premises. The gross receipts during the
current quarter follow:
From operation of race track
From restaurant
From television coverage
From rental of Gloriants

P1,100,000
1,000,000
1,300,000
1,200,000

Required: Answer the following questions:

a. How much amusement tax is payable by Carrie Rista?
b. Is the Gloriants restaurant subject to amusement tax?
10. Charmaine sold 10,000 shares of stock costing P95,000 for P100,000. The par value
of the stock is P9 per share.
Required- Compute the following:
a. Applicable tax if the shares are listed and traded in the Philippine Stock
Exchange (PSE).
b. Applicable tax if the shares are not listed (traded) in the PSE
11. The following data were taken from the records of Toralba Company:
Cash sales
Installment sales
Sales on account
Sales returns
Sales discount

P572,000
913,000
297,000
18,700
13,200

Required: Compute the gross selling price and the tax base.
12. Tindera Co, a VAT registered taxpayer, sold to Mommy Mely some pieces of
merchandise. The amount indicated in the invoice is P8,800. Subsequently, Mommy
Mely sold the same goods to Papa Billy for P11,000 who later sold the same to Baby
Lee for P13,200.
Required:
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Business Taxes Problems

a. Record the journal entries necessary to record the above transactions in the
book of Tindera Co.
b. Record the necessary journal entries in the applicable books of Mommy Mely.
c. Compute the VAT payable by Mommy Mely.
d. Record the necessary journal entries in the books of Papa Billy.
e. What is the tax consequence on Baby Lee of the above transactions?
13. Heaven Footsteps, a shoe mart, purchased 100 pairs of shoes from its distributor.
Each pair is worth P1,012 and sold by the shoe mart at P1,100. During the month,
the management decided to give one (1) pair of shoes to each of the ten (10)
salesladies.
Required:
a. Compute the VAT payable by Heaven Footsteps.
b. Compute the VAT payable assuming that distribution of shoes to salesladies
are not deemed sale transactions.
c. For whose advantage are deemed sales transactions, to the taxpayer or to
the government.
14. Aniano is engaged in a merchandising business. His sales and other data during the
month of January 2004 are shown below:
Cash sales
P 770,000.
Sales returns on cash sales
55,000.
Installment sales
495,000.
Goods consigned
Jan. 1, 2004
P265,000
October 1, 2003
16,500
Goods taken for personal use
18,150.
Good taken as payment to creditors
25,850.
Purchases of merchandise
946,000.
Purchases of Supplies
88,000.
Telephone bills on domestic call
3,300.
Required: Compute the following:
a. Output tax.
b. Input tax.
c. VAT Payable.
15. The following data reveals the March, 2004 records of Victory Corporation, a VAT
registered taxpayer:
Domestic sales
P1,056,000
Export sales, F.O.B. shipping point
820,000.
Sale of goods to Five Star in China, but delivered to Pinay, a
resident, (payment was remitted in dollars by Five Star
through BPI)
750,000.
Purchases of goods sold locally
575,300.
Purchases of raw materials on goods exported
423,500.
Required: Compute the VAT Payable by Victory Corporation during the month if it
decides to claim as tax credit the input tax corresponding to the export
sale.

Business Taxes Problems

16. Coco Nat is engaged in purchasing copra from copra producers and process them
into canned cooking oil. In February 2005 he made total purchases of P800,000,
processed them into canned cooking oil and sold the same to the public. The
taxable sales amounted to P2,090,000. Purchases of canning and labeling
materials totaled P269,500.
Questions:
a. How much is the presumptive input tax?
b. How much is the VAT payable if there is any?
17. Rhodora Company is engaged in business which is subject to value added tax. It
also operates a business which is subject to percentage tax. Its sales and
purchases during the quarter are shown below:
Invoice, VAT business
P1,650,000.
Invoice, Non-VAT business
900,000.
Purchases, VAT business
385,000.
Purchases, non-VAT business
247,500.
Unallocated input taxes
40,000.
Required: Compute the VAT Payable by Rhodora Company.
18. Delta Bus Company is operating provincial buses from Dagupan to Baguio and
Baguio to Dagupan. Mr. Peter Pans took a ride on one of the buses for which he
was issued two (2) tickets: Ticket no. 669 covering his one (1) way fare of P280
and Ticket no. 670 covering his cargoes in the amount of P220. Delta Company
has accumulated VAT invoiced purchases, such as lubricating oil in the amount of
P55 and was in the amount of P66.
Questions:
a. Which of the above ticket sales is subject to VAT?
b. How much is the VAT payable of Delta Company assuming no other relevant
information?
19. Engr. Del Hensia is a building contractor. His records show the following information
about the current quarter.
Contract A
Contract B
Contract C

Price
P2,200,000
4,000,000
2,500,000

Collection
P1,760,000
3,300,000*
385,000**

* Includes P1,100,000 advances for work to be done the following quarter.

** Contract C has been completed since last year. This amount represents
receivable as of last year collected during the current quarter.
Payments made:
For services of subcontractor
Purchases of construction materials
Wages of employees
Purchases of supplies

P1,540,000.
682,000.
450,000.
55,000.

Required: Compute the VAT Payable.

20. Determine which of the following cases is subject to VAT.
Case
A
B
C
D

Monthly Rent
P8,000
P7,500
P9,000
P9,000
4

Annual Rent
P400,000
P450,000
P500,000
P600,000

Answer

Business Taxes Problems

21. Joey Imported goods from Hongkong for use in business. The following are the data
relative to such importation:
Invoice amount
Value of goods as determined by the BOC
Customs duties
Freight
Insurance
Other charges
Facilitation fee paid through fixers

$ 9,500
$11,200
P10,500
6,000
8,000
12,500
10,000

After 20 days, the goods were sold to Mr. Quinto for P797,500. Exchange rate as
of the date of importation is P55.00 to a dollar.
Required: Compute the VAT Payable by Joey on:
a. the importation.
b. the subsequent sale.
22. Papa Libre, a tax exempt person, imported goods from the United States. Later, he
sold them to Dima Suerte, a non-exempt person. Who shall be liable to pay the
VAT on importation?
23. Intel Company has the following records of output and input taxes during the third
quarter of the current year:
Output
Taxes
P140,000
257,000
190,000

July
August
September

Input
Taxes
P165,000
198,000
156,000

Required: Compute the followinga. VAT payable for the months of July and August.
b. VAT payable for the third quarter.
24. The following data pertain to the operation of a VAT registered taxpayer for the
current relevant period:
Sales invoices:
Cash sales invoices
P462,000
Charge sales invoices
693,000
Purchase invoices:
Merchandise from VAT-registered business 495,000
Operating supplies from VAT-registered person.
121,000
Importation for sale locally (VAT inclusive)
275,000
Payment for operating services (VAT inclusive)
93,500
Various payments to non-VAT persons
71,500
Required: Compute the following:
a. Total output taxes for the period.
b. Total creditable input taxes for the period.
c. VAT payable for the period.
d. Cost of sales for the period.
e. Gross profit for the period.
f. Net operating income for the period.

Business Taxes Problems

25. The following data pertain to the activities of a general contractor:
Total billings for the accomplishments for the period:
Service fee inclusive of VAT
P330,000
Construction supplies sold (VAT included)
27,500
Actual amount collected for services rendered
165,000
Total payments made to VAT persons for the period:
Construction supplies suppliers
P110,000
Sub-contractors (VAT registered)
55,000
Required: Compute the following:
a. Total output VAT for the period.
b. Total input VAT for the period.
c. Net VAT payable (to be remitted).
26. A VAT-registered business has the following transactions for the current period:
Purchases inclusive of VAT
Sales, with 10% VAT
Export sales, exempt per treaty
Required: Compute the followinga. Total output VAT for the period.
b. Total input VAT for the period.
c. Net VAT Payable (to be remitted).

P550,000.
544,500.
165,000.