CHAPT-3 CONCEPTS OF INCOME - INCOME TAXATION 5TH Edition(BY...

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SUGGESTED ANSWERS Chapter 3: Concept of Income CHAPTER 3 CONCEPT OF INCOME Problem  3  – 1  TRUE OR FALSE 1. False  – Some  wealth  that  made  to increase  the  taxpayer’s  net  worth  are  gifts  and   inheritance  and  these  are  not  taxable  income. 2. True 3. True 4. False  – Filipino  citizen  who  is not  residing  in  the  Philippines  is taxable  only  for income   earned  within. 5. False  – The  basis  of tax  is the  fair  market  value  of the  instrument. 6. False  – Not income  for the  employee  and  not  subject  to income  tax  because  the   beneficiary  is the  employer.   7. False  – Accrual  reporting  reports  income  when  there  is earning  regardless  of collection. 8. False  – Calendar  year  basis 9. True 10. False  – This  rule  applies  to individual  taxpayers. 11. False  – There  is no  rule  of 25%  initial  payment  if the  sale  is made  on  regular  basis  of  personal  goods. 12. True   13. True 14. True Problem  3  – 2   1.  A 11.  B 2.  D 12.  A 3.  B 13.  A 4.  D 14.  D 5.  C 15.  A 6.  B 16.  B 7.   17.  D 8.  C 18.  C 9.  C 19.  C 10.  C 20.  D 21.  A Problem  3  – 3   A Net  assets  ending  (P300,000  – P50,000) P250,000 Net  assets  beg.  (P400,  000  – P150,000) ( 250,000) Balance P    -  0  - Add: Owner’s  drawings   245,000 Reportable  income  (loss) P245,000 Problem  3  – 4   D Net  assets,  end  of year P 100,000 Add: Personal  drawing      70,000 Total   P 170,000 Less:  Net assets,  beginning  of year    150,000 Business  income P   20,000 Problem  3  – 5   C Net  assets  ending  (P530,000  – P130,000) P400,000 Net  assets  beg.   ( 250,000) Reportable  income  (loss) P150,000 Problem  3  – 6   B Increase  in  total  assets  P 250,000 Decrease  in  total  liabilities 160,000 Drawings   20,000 Additional  investments  (  50,000)
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CHAPT-3 CONCEPTS OF INCOME - INCOME TAXATION 5TH Edition(BY...

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