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In 2017, ABAKADA Corporation entered into a lease agreement with ABC Corporation with the following terms:

In 2017, ABAKADA Corporation entered into a lease agreement with ABC Corporation with the following terms:

Annual rent of office building                           P         2,100,000

Annual rent of warehouse                                            4,200,000

Real property taxes for 2017                                          225,000

Cost of leasehold improvement                                   1,500,000

     Estimated useful life - 10 years

     Lease term - 5 years

Additional information:

ABAKADA Corporation paid local taxes and licenses of P83,500 for the year.

Import duties paid for the year - P75,000

Quarterly income tax payments (1st to 3rd quarter) - P210,000

1. The amount of deductible rent expense is:

Select one:

a. P0

b. P2,100,000

c. P4,200,000

d. P6,300,000

2. The amount of deductible taxes is:

Select one:

a. P75,000

b. P83,500

c. P383,500

d. P225,000



Mr. John Delos Santos, a mixed income earner, presented the following data for the following year:

Annual salary as chief financial officer                    540,000

13th month pay                                                                 45,000

Representation and travelling

Allowance, subject to liquidation                            90,000

Gross sales from business                                          35% of sales

Allowable business expenses                                   320,000


3. The amount of deduction to business income, if Mr. Delos Santos opted to used optional standard deduction?

Select one:

a. P720,000

b. P468,000

c. P788,000

d. P1,040,000

4. The amount of deduction to business income, if Mr. Delos Santos opted to used itemized deduction?

Select one:

a. P468,000

b. P320,000

c. P240,000

d. P720,000

5. DEF Corporation is engaged in the sale of goods with net sales of P3,000,000. The actual representation expense for the taxable quarter totaled P50 ,000. For income tax purposes, how much is the deductible representation expense?

Select one:

a. P10,000

b. P5,000

c. P15,000

d. P50,000

6. ABC Corporation has the following interest income and expense for the taxable year.

Interest income, net of 20% final tax                     P24,000

Interest expense                                                    60,000

How much is the deductible interest expense?

Select one:

a. P60,000

b. P9,900

c. P50,100

d. P24,000

7. XYZ Corporation has the following interest income and expense for the taxable year.

Interest income, net of 20% final tax                     P24,000

Interest expense                                                    60,000

Interest on unpaid taxes                                           5,000      

How much is the deductible interest expense?

Select one:

a. P55,100

b. P60,000

c. P50,100

d. P65,000


 On October 1, 2014, Juan Dela Cruz purchased an automobile for P500,000 which will be used exclusively for his practice of profession. He deducted annual depreciation on the basis of an estimated useful life of five (5) years.

On October 1, 2017, the automobile was partially damaged in an accidental collision with another vehicle. The fair market value of the vehicle before the collision is at its carrying value of P200,000. After the collision, the fair market value was determined at P100,000.

Mr. Dela Cruz received insurance proceeds of P70,000 to cover the loss.

8. How much was the deductible loss if the cost to restore was P250,000?

(Note: Disregard fair market values)

Select one:

a. P250,000

b. P180,000

c. P200,000

d. P130,000

9. How much was the deductible loss?

Select one:

a. P130,000

b. P200,000

c. P30,000

d. P100,000

10. How much was the deductible loss if the automobile was totally destroyed?

(Note: Disregard fair market values)

Select one:

a. P200,000

b. P130,000

c. P100,000

d. P30,000

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