IMUS INSTITUTE OF SCIENCE AND TECHNOLOGY INC

Nueno Avenue, Imus City Cavite

COLLEGE OF BUSINESS ADMINISTRATION

FINAL EXAMINATION
in
Tax Planning and Practices
Professor: Andres S. Montalan Jr., Ph.D, CPA
Name of Student: __________________________________________________ Score:
__________________
Course: ___________________________________________________Date:
__________________

PROBLEM SOLVING
Instruction: Provide computation of solution for each problem. Use yellow pad paper.
Erasures are allowed.

1. JPAMA Corporation is a newly registered corporation with the objective of providing

consultancy services to their prospective clients. The company is still preparing its
registration with Bureau of Internal Revenue (BIR). Erriz Ducay, the Chief Financial
Officer of the company approaches you to render your expertise in taxation. The
objective of Ms Ducay is to select best kind of taxpayer to reduce the tax burden:
Annual Income Tax Payable + 3% Percentage Tax (non-vat) or 12% VAT

The following informations were provided to you by Ms. Ducay

a. The company is expected to generate monthly revenue of 1,120,000 pesos
inclusive of taxes.
b. Due to minimal expenses, the corporation can only incur maximum monthly Input
vat of 40,000 pesos.
c. Since the corporation is in service business, a 2% creditable withholding tax will
be withheld by their clients. This 2% can be used as deduction from the annual
income tax due.
d. Direct cost of service 600,000 pesos monthly
e. Administrative expenses 5% of annual revenue
f. To simplify the computation of income tax and less priority in BIR audit, the
company will avail 40% optional standard deduction.
g. The corporate income tax rate is 30%

Your expertise will be compensated by the company in the amount of one hundred
thousand pesos (100,000.00). Ms Ducay is requesting you to provide her an analysis
under two scenarios of taxpayers - Non-VAT and VAT taxpayer to answer the
following:

1. In each scenario, how much will be the income tax payable? (10pts)
2. In each scenario, how much will be the total tax burden? (10pts)
3. What kind of taxpayer will you recommend to Ms Ducay for their registration to
Bureau of Internal Revenue? Why? (10pts)

2. The 2016 Income Statement of Bayanihan Corporation prepared under GAAP rule is
as follows

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 IMUS INSTITUTE OF SCIENCE AND TECHNOLOGY INC
Nueno Avenue, Imus City Cavite
COLLEGE OF BUSINESS ADMINISTRATION

During the year, Bayanihan Corporation has total Creditable Withholding Tax of
100,000 pesos. The corporate income tax is 30%.

Required: Compute the following

1. Reportable gross Income per Income Tax return. (5pts)

2. Net Taxable Income per Income Tax Return. (5pts)
3. Final withholding tax paid. (5pts)
4. Net Income after tax (5pts)
5. Income Tax Payable (5pts)
6. If the company will avail optional standard deduction, how much will be the tax
shield by the company? (5pts)

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