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SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
CHAPTER 10
VALUE-ADDED TAX
Problem 101
1. False subject to VAT. This is considered as transaction deemed sale.
2. True
3. False sale of real property classified as capital asset is not subject to VAT.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
False sale of real property classified as ordinary asset is exempt from VAT if the amount of
lot is P1,919,500 and below or house and lot if the price is P3,199,200 and below.
True
False acquisition cost or current market price of goods whichever is lower.
True
False the basis is the amount of debt cancelled.
True
False subject to VAT.
True
True
True
False not subject to output VAT. This is to be treated as operating expense.
False not transactions deemed sale.
Problem 102
1. False subject to VAT.
2. True
3. True
4. True
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
False
should
True
False
False
True
True
False
True
True
True
False
the exemption is applicable only to residential lot and the amount of selling price
not exceed P1,919,500 per residential lot.
this would refer to gross selling price.
deemed inclusive of VAT.
Problem 103
1. D
2. A
3. B
4. C
5. C
6. D
7. B
8. A
9. A
10. A
Problem 104
1. C
2. D
3. A
4. C
5. D
6. B
7. A & B
8. D
9. B
10. B
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 71
SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 5
A
Warehouse
Business delivery trucks
Amount subject to VAT
P4,000,000
500,000
P4,500,000
Problem 10 6
B
Sale of furniture within
Furniture taken from inventory for personal use
Amount subject to 12% VAT
P1,800,000
200,000
P2,000,000
Problem 10 7
Zero. The person responsible to pay the VAT is the buyer. Therefore, Kamukamo is not liable to
pay VAT to the Philippine Government. Corona Enterprise is responsible to remit to the BIR the
related VAT on the purchase transaction.
Problem 10 8
A
Raw materials used
Direct labor
Factory overhead
Excise tax
Mark-up
Total amount subject to VAT
Output VAT (P1,200,000 x 12%)
Less: Input VAT from purchases (P896,000/9.333)
Input VAT from factory overhead
Net VAT payable
Problem 10 9
B
Cash sales of goods to regular customers
Credit sales of goods to regular customers
Merchandise use by the owner for personal consumption (P200,000 x 70%)
Reasonable taxable base of sales for VAT purposes
Problem 10 10
D
Gross sales:
Cash sales
Credit sales
Sales returns
Sale of obsolete inventories
Consigned goods (unsold after 90 days)
Total
Multiplied by VAT rate
Output VAT
Problem 10 11
C
Consumption of inventory by the manager at cost
Merchandise used to pay dividends at cost
Payment to creditors at the amount of debt cancelled
Sale of scrap materials at market price
Total unreported additional sales
Multiplied by VAT rate
Output VAT
P400,000
200,000
100,000
70,000
430,000
P1,200,000
P144,000
P96,000
4,000
100,000
P 44,000
P1,500,000
500,000
140,000
P2,140,000
500,000
800,000
( 100,000)
60,000
100,000
P1,360,000
12%
P 163,200
P
100,000
600,000
800,000
40,000
P1,740,000
12%
P 208,800
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 72
SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 12
A
Output VAT January 1 to Sept. 30, 201A
Output VAT October 1 to Dec. 31, 201A (P700,000/9.333)
Total output VAT
Less: Input VAT from:
Purchases (P1,120,000/9.333)
Operating expenses (P4,200 + P1,800)
Net VAT payable
P144,000
75,000
P219,000
P120,000
6,000
Problem 10 13
C
Merchandise inventory
Equipment
Furniture and fixtures
Total assets
Multiplied by VAT rate
Output VAT
Less: Input VAT
Net VAT payable
Problem 10 14
126,000
P 93,000
P 80,000
160,000
60,000
P300,000
12%
P 36,000
16,000
P 20,000
Zero. Transfers of assets as a result of merger or consolidation are not considered transactions
deemed sales. These are just transfers in form, not in substance. (RMC No. 47-99)
Problem 10 15
NOT IN THE CHOICES
Sales (P1,500,000/60%)
Obsolete inventory sold at 80% discount, at cost (P100,000 x 20%)
Consigned goods beyond 60 days at cost
Total taxable base
Multiplied by VAT rate
Output VAT
Problem 10 16
C
Cash sales
Add: Net credit sales:
Gross amount, net of trade discount
(P365,000 x 90%)
Less: Sales return (P65,000 x 90%)
Taxable base
Multiplied by VAT rate
Output VAT
P2,500,000
20,000
400,000
P2,920,000
12%
P 350,200
P135,000
P328,500
58,500
270,000
P405,000
12%
P 48,600
Problem 10 17
1. Letter D
Sale of residential lot not exceeding P1,919,500 is VAT-exepmt.
2.
Letter A
VAT (P2,000,000 x 12%)
Problem 10 18
D
1 lot class A (P3,200,000 x 12%)
2 Commercial lots (P4,480,000/9.333)
Total output VAT
P240,000
P384,000
480,000
P864,000
Note: The basis of VAT for l lot class A is the fair market value, which is higher than the selling price. If the
FMV is higher than the selling price, the FMV is VAT exclusive. (Rev. Regs. No. 4-2007)
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 73
SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 19
1.
Letter D
Zero, because the sale is not subject to VAT. Aside from the property is a capital asset, it is a
residential house and lot with a selling price not exceeding P3,199,200.
2.
Letter A
P420,000
Problem 5 20
C
VAT on down payment November 200A (P600,000 x 4M/3M) x 12%
Add: December 200A VAT on monthly collection (P20,000 x 4M/3M) x 12%
Output VAT on the year of sale
Problem 5 21
B
Second installment
Add: Surcharge (P3,750,000 x 5%)
Interest (P3,750,000 x 12% x 3/12)
Taxable base
Multiplied by VAT rate
Output VAT
Problem 10 22
A
Output VAT year 3 (P2,940,000/9.333)
Less: Creditable input VAT year 3
Excess creditable input VAT year 2 (P315,000 P350,000)
Net VAT payable
P187,500
112,500
P200,000
35,000
P96,000
3,200
P99,200
P3,750,000
300,000
P4,050,000
12%
P 486,000
P315,000
235,000
P 80,000
Problem 10 23
A
Output VAT (P7,500,000 x 12%), higher amount
Less: Creditable input VAT year 1
Net VAT payable (initial payment exceeds 25% = considered cash sales)
P900,000
300,000
P600,000
Problem 10 24
C
Output VAT higher (P5,000,000 x 12%)
Less: Output VAT already paid (P3,360,000/4) x 3
Output VAT still to be paid
P600,000
270,000
P330,000
Problem 10 25
B
2,000 Sacks of cotton and cotton seedlings at P900 each
Sale of woods and charcoal
Total
Multiplied by VAT rate
VAT payable
Problem 10 26
Cost of goods manufactured (P200,000 + P100,000 + P100,000)
Less: Unsold goods manufactured
Total cost of goods sold
Add: Excise tax (P385,000 x 20%)
Mark-up (P385,000 x 50%)
Total sales
Multiplied by VAT rate
Output VAT
Less: Input VAT from:
Raw materials purchase per invoice (P336,000/9.333)
Repair of store office
Supplies purchase per invoice (P28,000/9.333)
VAT payable
P1,800,000
400,000
P2,200,000
12%
P 264,000
P 77,000
192,500
P 36,000
450
3,000
P400,000
15,000
P385,000
269,500
P654,500
12%
P 78,540
39,450
P 39,090
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 74
SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 27
Cash sales
Add: Credit sales
Installment sales collected
Deemed sales (P20,000 + P180,000) x 60%
Total sales including deemed sales
Multiplied by VAT rate
Output VAT
Less: Input VAT:
Purchases including VAT (P448,000/9.333)
Input VAT credit from previous month
Net VAT payable
P200,000
100,000
120,000
P 48,000
36,400
Problem 10 28
Total domestic sales
Inventory consumed for personal use
Total sales subject to 12% VAT
Multiplied by VAT rate
Output VAT
Problem 10 29
Output VAT (P500,000 P100,000) x 12%
Less: Input VAT per record
Business tax paid
Remaining unpaid VAT
2.
Sales
Less: Sales returns
Sales discounts
Net sales
Less: Cost of sales (P1,000,000 + P600,000)
Gross income
Less: OSD (P3,100,000 x 40%)
Net taxable income
Multiplied by corporate income tax rate
Net taxable income
800,000
420,000
P1,220,000
12%
P 146,400
84,400
62,000
P1,000,000
100,000
P1,100,000
12%
P 132,000
P48,000
P25,000
10,000
Problem 10 30
1. Sales
Less: Sales returns
Vatable sales
Output VAT (P4,900,000 x 12%)
Less: Input VAT from:
Purchases/services (P1,120,000/9.333)
Importation (P600,000 x 12%)
Capital goods (P1,344,000/9.333)/ 5 years
Net VAT payable
35,000
P13,000
P5,000,000
100,000
P4,900,000
P
P120,000
72,000
28,800
P100,000
200,000
588,000
220,800
P367,200
P5,000,000
300,000
P4,700,000
1,600,000
P3,100,000
1,240,000
P1,860,000
30%
P 558,000
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 75
SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 31
1. Sales
Consigned goods to Victorias (65 days)
Vatable sales
P5,000,000
500,000
P5,500,000
Note: The accounts receivable is assumed to have been included as part of sales.
Raw materials used (P1,880,000 x 60%)
Increase in inventory raw materials
Total purchases
Output VAT (P5,500,000 x 12%)
Less: Input VAT from expenses
Presumptive input VAT (P1,488,000 x 4%)
Net VAT payable
2.
P1,128,000
360,000
P1,488,000
P660,000
P36,000
59,520
Actual sales
Less: Cost of sales
Gross income
Less: OSD (P3,120,000 x 40%) higher better
Net taxable income
Multiplied by corporate income tax rate
Income tax due
95,520
P564,480
P5,000,000
1,880,000
P3,120,000
1,248,000
P1,872,000
30%
P 561,600
P60,000
Output VAT
Less: Input VAT
VAT payable
P60,000
20,000
P40,000
Problem 10 33
Output VAT (P11,200,000/1.12) x 12%
Less: Input VAT from:
Purchases (P7,840,000/1.12) x 12%
Unutilized input VAT of M Corporation
Net VAT payable
Problem 10 34
1. Total Output VAT
First year:
P1,200,000
P840,000
300,000
1,140,000
60,000
P 60,000
Second year:
(P2,000,000 x ) x 12%
(P2,000,000 x 6% x 12%)
120,000
14,400
Third year:
(P1,000,000 x 12%)
(P1,000,000 x 6% x 12%)
120,000
7,200
P321,600
P360,000
321,600
P 38,400
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 76
SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 35
1.
Year of sale
Output VAT (P100,000 x 12%)
2.
Second year
Output VAT (P200,000 x 12%)
(P400,000 x 6% x 12%)
Total Output VAT 2
3.
P 12,000
nd
P 24,000
2,880
year
P 26,880
Third year
Output VAT (P200,000 x 12%)
(P200,000 x 6% x 12%)
Total Output VAT 3
rd
P 24,000
1,440
year
P 25,440
Problem 10 36
1. VAT (P10M x 12%)
Real property sales subject to 25% rule.
Sales of house and lot of P2,500,000 & below is
exempt from business taxes.
2.
Problem 10 37
1. Net income (P570,000/30%)
Less: Gain on sale of capital asset
Net operating income
Add: Cost of sales (P120,000/12%)
Sales discounts
Operating expense before taxes
Community tax
Amount subject to VAT
P1,200,000
P10,000,000
400,000
P10,400,000
P6,000,000
300,000
P1,000,000
150,000
990,000
10,000
6,300,000
P4,100,000
2,000,000
P2,100,000
30%
P 630,000
P1,900,000
50,000
P1,850,000
2,150,000
P4,000,000
P 480,000
3.
P 480,000
120,000
P 360,000
Output VAT
Less: Input VAT
VAT payable
Problem 10 38
1.
Gross income
Add: Cost of sales (P10,000,000 + P150,000 P850,000)
Net sales (P12,300,000 + P9,000,000)
Add: Sales discounts due to prompt payments
Vatable base
Multiplied by VAT rate
P12,300,000
9,300,000
P21,600,000
200,000
P21,800,000
12%
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 77
SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Output VAT
Less: Input VAT
Net VAT payable
2.
P 2,616,000
1,200,000
P1,416,,000
P12,300,000
Gross income
4,920,000 P
7,380,000
30%
P2,214,000
P1,000,000
300,000
100,000
35,000
70,000
P1,505,000
P48,000
36,000
36,000
120,000
P 60,600
Note: The transactions deemed sale may be reduced by 30%. (R.A. 9337)
Problem 10 40
1. Sales
Transactions deemed sale:
Consigned goods (P560,000 x 70%)
Inventory used to pay dividends (P400,000 x 70%)
Total
Less: Sales returns and allowances
Amount subject to VAT
Multiplied by VAT rate
Output VAT
2. Actual net sales
Less: Cost of sales
Gross profit
Less: OSD (P4,000,000 x 40%) higher better*
Net taxable income
Multiplied by corporate income tax rate
Income tax due
12%
P 180,600
P10,000,000
P392,000
280,000
672,000
P10,672,000
300,000
P10,372,000
12%
P 1,244,640
P9,500,000
5,500,000
P4,000,000
1,600,000
P2,400,000
30%
P 720,000
*Note: The actual operating expense is lower than OSD because the bad debts is based on percent
of receivable which is not allowed as deduction. Also, the interest expense deductible would only
be P34,800.