hursday, September 11, 2014

2014 Quizzers on Philippine Corporate Taxation

Instruction: Determine the best answer per question given. This quizzer is intended to test your
knowledge on Corporate Taxation under the Philippine Income Tax System.
Estimated time: One (1) hour
(1) Hungry Shark corporation, in its third year of operations, had the following data:
Gross Income, Philippines
P
2,000,000.00
Gross Income, foreign
1,000,000.00
Expenses, Philippines
1,000,000.00
Expenses, foreign
500,000.00
(a)
(b)
(c)
(d)

If the corporation is a domestic corporation, the taxable income is:

P1,000,000
P2,000,000
P500,000
P1,500,000

(2) One of the following statements is not correct. Which is it?

(a) For domestic corporations, the capital gain tax on sale of shares of stock are the same as the capital
gain on such assets of resident citizens of the Philippines.
(b) The final tax on interest on foreign currency deposit under the expanded foreign currency deposit
system for domestic corporations is the same as that of resident citizens of the Philippines at seven and
one-half percent (7 %)
(c) Dividend received by a domestic corporation from a domestic corporation subject to tax is exempt
from income tax of the corporation receiving the dividend.
(d) Prizes exceeding P10,000 received by a domestic corporation is subject to a final tax of twenty percent
(20%)
(3) A domestic corporation, in its fourth year of operations, had the following data for the year:
Net sales
P
2,000,000.00
Capital gain on direct sale at P500,000 to a buyer of shares of
a domestic corporation
200,000.00
Capital gain on sale thru a real estate broker of land and building
outside Philippines for P5,000,000
1,000,000.00
Dividend from a domestic corporation
50,000.00
Interest on bank deposit
40.000.00
Cost of sales
600,000.00
Quarterly corporate income tax paid
190,000.00
Operating Expenses
500,000.00
(a)
(b)
(c)
(d)

The income tax still due at the end of the year is:
P125,000
P80,000
P270,800
P220,800

(4) Statement 1: The minimum corporate income tax of a trading or manufacturing concern is based on
gross profit from sales.
Statement 2: The minimum corporate income tax of a service concern is based on net revenues or
receipts less direct costs of services.
(a) Both statements are true
(b) Both statements are false
(c) The first statement is true but the second statement is false

(d) The first statement is false but the second statement is true
(5)
(a)
(b)
(c)
(d)

The following are true, except one. Which is exception:

A domestic corporation is subject to MCIT on gross income from within and outside the Philippines.
A resident corporation is subject to the MCIT on gross income from within the Philippines.
A non-resident corporation is not subject to the MCIT
The optional gross income tax (GIT) applies to domestic and resident corporations.

(6) Selected cumulative balances were taken from the records of Flappy Bird Corporation, a domestic
corporation, in its fourth year of operations in 2013, which had an income tax refundable of P10,000
for a preceding year for which there is a certificate of tax credit.

(a)
(b)
(c)
(d)

The income tax due (or refundable) at the end of the year:
P321,000
P371,000
P43,000
P76,000

(7) Which of the following statements is wrong?

(a) The quarterly income tax of a corporation for any of the first, second or third quarters is filed, and the
tax due is paid, within sixty (60) days after the close of the quarter.
(b) The annual income tax return of a corporation is filed, and the tax due is paid on or before the
fifteenth day of the fourth month following the close of the taxable year
(c) There can be an income tax refundable in a quarterly income tax return of a corporation
(d) There can be an income tax refundable in the final income tax return of a corporation
(8) One of the following statements is wrong. Identify. The improperly accumulated earnings tax imposed
on corporations:
(a) Is calculated to force corporations to pay-out dividends
(b) Is computed on the improperly accumulated income over several years
(c) Is based on the net income per books after the income tax
(d) Is based on a statutory formula for improperly accumulated income
(9) All, except one, of the following, are not subject to the improperly accumulated earnings tax (IAET).
Which is the exception?
(a) Publicly-held corporations
(b) Banks and other financial intermediaries
(c) Insurance Companies
(d) Service Enterprises
(10)The following except one, give rise to the presumption that a corporation is improperly accumulating
profits. Identify the exception:
(a) The corporation is mere holding company
(b) The corporation is an investment company

(c) The corporation permits its profit to accumulate beyond the reasonable needs of the business
(d) The corporation is a service enterprise
(11)Angry Birds Inc., a domestic corporation, had the following selected data for 2009, the accumulated
earnings for which year the Bureau of Internal Revenue (BIR) considered to be improper:
Cost of Sales
P
2,000,000.00
Minimum Corporate Income Tax
110,000.00
Business expenses
1,000,000.00
Interest on Philippine currency bank deposit
50,000.00
Capital gain on sale directly to buyer of shares
120,000.00
Dividend income from domestic corporation
60,000.00
Dividends declared and paid during the year
500,000.00
Maturing bonds in 2010
150,000.00
The improperly accumulated earnings tax (IAET) is:
(a) P175,000
(b) P264,300
(c) P256,300
(d) 380,300
(12)A mother corporation is abroad, with business in the Philippines through its branch in the Philippines.
Which of the following statements is wrong?
(a) In a year, the branch in the Philippines is subject to a profit remittance tax on its remittance of profits
to the mother company abroad, even if the profits from which the remittance was made was a prior
years profits.
(b) The profit remittance tax is fifteen (15%) percent of the total amount or profit for remittance, as
applied for with the bank.
(c) The bank with which the application for remittance was filed would be the withholding agent of the
Bureau of Internal Revenue
(d) Even activities registered with the Philippine Economic Zone Authority (PEZA), from the profits from
which the remittance is applied for, will be subject to the profit remittance tax.
(13)Statement 1: A private educational institution is a special corporation subject to income tax on all its
income at ten percent (10%)
Statement 2: A private educational institution may be treated as an ordinary corporation subject to all
the income tax rules on corporation.
(a) Both statements are true
(b) Both statements are false
(c) First statement is true but second statement is false
(d) First statement is false but second statement is true
(14)Statement 1: Corporations, agencies or instrumentalities owned or controlled by the government shall
pay the income tax as their counterpart private corporations.
Statement 2: The Government Service Insurance System and the Social Security System are subject to
income tax.
(a) Both statements are true
(b) Both statements are false
(c) First statement is true but second statement is false
(d) First statement is false but second statement is true
(15)Corporations exempt from income tax are enumerated under Section 30 of the National Internal
Revenue Code.
Statement 1: They are not subject to income tax on income received which are incidental or
necessarily connected with the purposes for which they were organized and are operating.
Statement 2: They are subject to income tax on income of whatever kind and character from any of
their properties, real or personal, or from any activity conducted for profit, regardless of the
disposition of such income.
(a) Both statements are true
(b) Both statements are false
(c) First statement is true but second statement is false

(d) First statement is false but second statement is true

(16)Which of the following is treated as a corporation?
(a) General partnership in trade
(b) General professional partnership
(c) Joint venture or consortium for construction project
(d) Joint venture or consortium for engaging in energy operations under a service contract with the
government.
(17)Temple Run Company is a general professional partnership for gaming applications, with Mr. Temple
and Mr. Run as partners and equally participating in the income and expenses. The following are the
data for the partnership and the partners in the calendar year:

The net taxable income of Temple Run Company is:

(a) P250,000
(b) P410,000
(c) P60,000

(d) P -0-

(18)Using the information on question 17, what is the income tax due of Temple Run Company:
(a) P75,000
(b) P123,000
(c) P18,000
(d) P -0(19)Using the information on question 17, what is the net taxable income of Mr. Temple:
(a) P80,000
(b) P250,000
(c) P125,000
(d) P -0(20)Using the information on question 17, what is the net taxable income of Mr. Run:
(a) P80,000
(b) P250,000
(c) P125,000
(d) P -0(21)Zombie Tsunami Corp., a domestic corporation, is engaged in architectural design services. The
following are pertinent data:
Gross receipts
P
5,000,000.00
Sales returns and allowances
200,000.00
Sales discounts
250,000.00
Cost of services
2,250,000.00
Deductions
1,000,000.00
The Optional Corporate Income Tax or Gross Income Tax of Zombie Tsunami is:
(a) P345,000
(b) P195,000
(c) P682,500
(d) P750,000
(22)Candy Crush Inc., a domestic corporation has the following data in 2013:
Gross Sales
P
4,000,000.00
Cost of Sales
1,500,000.00
Business Expenses
1,000,000.00
The Gross Income Tax of Candy Crush assuming it is a trading business:
(a) P375,000
(b) P600,000
(c) P480,000
(d) P125,000
(23)Using the same information on question 22, the Optional Corporate Income Tax of Candy Crush
assuming it is a service business:
(a) P375,000
(b) P600,000
(c) P480,000
(d) P125,000
Use the following information for question 24 through 27
In 2006, Skater Boy Corporation, a resident foreign corporation, was on its sixth year of operation. The
following data pertain to its operation in the Philippines for the years 2006 and 2007:

(24)The regular corporate income tax for 2006 is:

(a) P6,000
(b) P12,000
(c) P14,000
(d) P15,000
(25)The income tax due for 2006
(a) P6,000
(b) P12,000
(c) P14,000
(d) P15,000
(26)The minimum corporate income tax for 2007:
(a) P6,000
(b) P12,000
(c) P14,000
(d) P15,000
(27)The normal corporate income tax for 2007:
(a) P6,000
(b) P12,000
(c) P14,000
(d) P15,000
(28)Reasonable needs of the business is inconsistent with the concepts of IAET when:
(a) The direct correlation of anticipated needs to the accumulation of profits is proved.
(b) It is not necessary for the purpose of the business considering all the circumstances of the case
(c) The immediacy test under the American jurisprudence is adopted in Philippine jurisdiction
(d) Construed as immediate needs of the business including reasonable anticipated needs
(29)For purposes of determining the Improperly Accumulated Taxable Income for a taxable year, the
following, except one, are added to that years taxable income. Which one?
(a) Income exempt from tax
(b) Income excluded from gross income
(c) Income subject to final withholding tax
(d) The amount of net operating loss carry-over (NOLCO)
(30)For purposes of determining the Improperly Accumulated Taxable Income for a taxable year, the
following except one, are reduced from that years taxable income after appropriately adding certain
items. Which one?
(a) 10% improperly accumulated earnings tax
(b) Income tax paid/ payable for the taxable year
(c) Dividends actually or constructively paid/ issued
(d) Amount reserved for the reasonable needs of the business
(31)Which of the following is not true?
(a) For purposes of the MCIT, the taxable year in which business operations commenced shall be the year
in which the domestic corporation registered with the BIR.
(b) Firms which were registered with BIR in 1994 and earlier years shall be covered by the MCIT beginning
January 1, 1998.

(c) Firms which were registered with the BIR in any month in 1998 shall be covered by the MCIT in 2002
after the lapse of three (3) calendar years from 1998.
(d) None of the above
(32)The MCIT applies to which of the following domestic corporations?
(a) Proprietary Educational Institutions
(b) Non-profit Hospitals
(c) Depository banks under the Expanded Foreign Currency Deposit System (FCDS) on income from foreign
currency transactions with the local commercial banks.
(d) Firms that are taxed under a special income tax regime
(e) All of the above
(f) None of the above
(33)Which of the following need not be deducted from gross sales to arrive at gross income for purposes of
computing MCIT of a merchandising/ manufacturing concern?
(a) Sales returns and allowances
(b) Sales discounts
(c) Cost of sales
(d) None of the above
(34)Which of the following need not be deducted from gross sales to arrive at gross income for purposes of
computing MCIT of a service concern?
(a) Sales returns and allowances
(b) Sales discounts
(c) Cost of sales
(d) None of the above
(35)Which of the following need not be deducted from gross sales to arrive at gross income for purposes of
computing OCIT or GIT of a merchandising/ manufacturing concern?
(a) Sales returns and allowances
(b) Sales discounts
(c) Cost of sales
(d) None of the above
(36)Which of the following need not be deducted from gross sales to arrive at gross income for purposes of
computing OCIT or GIT of a service concern?
(a) Sales returns and allowances
(b) Sales discounts
(c) Cost of sales
(d) None of the above
(37)A PEZA-registered enterprise has a registered and an unregistered activity. The MCIT shall apply to
the:
(a) Registered activity
(b) Unregistered activity
(c) Both activities
(d) Neither registered nor unregistered activity
(38)The minimum corporate income tax of a domestic or resident corporation is:
(a) 15% of gross income
(b) 2% of gross sales
(c) 2% of gross income
(d) 2% of gross income for Domestic Corporations while Resident Foreign Corporations are exempted from
MCIT computation.

(39)The records of DOTA Inc., a closely-held corporation, show the following calendar years:
2011:
Gross Income
P
3,000,000.00
Less: Expenses
2,500,000.00
Net Income
500,000.00
2012:
Gross Income
5,000,000.00
Expenses
3,000,000.00
Other income
Rent, net of 5% withholding tax
475,000.00
Interest on money market, net
80,000.00
Inter-corporate dividends
500,000.00
Additional information:
Dividends paid
1,500,000.00
Tax payments, 1st to 3rd quarter
50,000.00
How much is the improperly accumulated earnings tax in 2012?
(a) P70,500
(b) P83,000
(c) P101,900
(d) P103,900
Use the following information for questions 40 to 44
Cut the rope Corporation, a domestic corporation, was registered with the BIR in 1997. The following
data on income taxes during the years 2004 to 2011 were made available.

(40)Income tax payable for 2004

(a) P25,000
(b) P100,000

(c) P75,000

(d) P -0-

(41)Income tax payable for 2005

(a) P130,000
(b) P150,000

(c) P20,000

(d) P-0-

(42)Income tax payable for 2009

(a) P60,000
(b) P150,000

(c) P105,000

(d) P-0-

(43)Income tax payable for 2010

(a) P8,000
(b) P40,000

(c) P32,000

(44)Income tax payable for 2011

(a) P150,000
(b) P50,000

(c) P118,000

(d) P -0(d) P -0-

(45)Bubble Blast Company, a domestic corporation, has the following income taxes computation for the
year 2013 as follows:
Year 2013:
RCIT
P50,000
MCIT
P12,000
The journal entry for in 2013 to record Income Tax is:
(a) Income Tax Expense
P
50,000
Income Tax Payable
P
50,000

(b) Deferred Charges MCIT

Income Tax Payable
(c) Income Tax Expense
Deferred Charges MCIT
Income Tax Payable
(d) Income Tax Expense
Deferred Charges MCIT
Income Tax Payable

12,000
P
P
P

12,000
50,000
12,000
P
62,000
50,000
12,000
38,000

(46)A tax imposed whether a corporation has zero or negative taxable income or whenever the minimum
income tax is greater than the normal income tax due from such corporation:
(a) Improperly accumulated earnings tax (IAET)
(b) Optional Corporate Income Tax (OCIT)
(c) Capital Gains Tax (CGT)
(d) Minimum Corporate Income Tax (MCIT)
(47)A corporation which was registered with the Bureau of Internal Revenue in May 2007 shall be covered
by MCIT in:
(a) 2008
(b) 2009
(c) 2010
(d) 2011
(48)The BIR form used by corporations to file quarterly income tax returns:
(a) 1702
(b) 1702Q
(c) 2550

(d) 2550Q

(49)The BIR form used by corporations to file its annual income tax return:
(a) 1702
(b) 1702Q
(c) 2550

(d) 2550Q

(50)According to tax code, the last payment of filing income tax returns for all corporations having
calendar year or fiscal year of reporting is:
(a) At the end of every taxable year
(b) Once the income tax return, regardless of the month, is completed, it may be filed at any day of the
year immediately following the taxable year
(c) Every April 15 immediately following the taxable year for all corporations having calendar year and
fiscal year of reporting
(d) On the 15th day of the fourth (4th) month immediately following the taxable year
_________________________________________________________________________________
ANSWERS:
(1) Hungry Shark corporation, in its third year of operations, had the following data:
Gross Income, Philippines
P
2,000,000.00
Gross Income, foreign
1,000,000.00
Expenses, Philippines
1,000,000.00
Expenses, foreign
500,000.00
(a)
(b)
(c)
(d)

If the corporation is a domestic corporation, the taxable income is:

P1,000,000
P2,000,000
P500,000
P1,500,000
Answer: (d)
Gross Income, Philippines
Less: Expenses,
Philippines
Gross Income, foreign

P
1,000,000.00
P

2,000,000.00
P
1,000,000.00
1,000,000.00

Less: Expenses,
foreign
Taxable
Income
,500,000.00

500,000.00

500,000.00
P

(2) One of the following statements is not correct. Which is it?

(a) For domestic corporations, the capital gain tax on sale of shares of stock are the same as the capital
gain on such assets of resident citizens of the Philippines.
(b) The final tax on interest on foreign currency deposit under the expanded foreign currency deposit
system for domestic corporations is the same as that of resident citizens of the Philippines at seven and
one-half percent (7 %)
(c) Dividend received by a domestic corporation from a domestic corporation subject to tax is exempt
from income tax of the corporation receiving the dividend.
(d) Prizes exceeding P10,000 received by a domestic corporation is subject to a final tax of twenty percent
(20%)
Answer: (d)
(3) A domestic corporation, in its fourth year of operations, had the following data for the year:
Net sales
P
2,000,000.00
Capital gain on direct sale at P500,000 to a buyer of shares of
a domestic corporation
200,000.00
Capital gain on sale thru a real estate broker of land and building
outside Philippines for P5,000,000
1,000,000.00
Dividend from a domestic corporation
50,000.00
Interest on bank deposit
40.000.00
Cost of sales
600,000.00
Quarterly corporate income tax paid
190,000.00
Operating Expenses
500,000.00
(a)
(b)
(c)
(d)

The income tax still due at the end of the year is:
P125,000
P80,000
P270,800
P220,800
Answer: (b)
Net sales
P
2,000,000
Less: Cost of sales
600,000
Gross Profit from sales
1,400,000
Less: Operating Expenses
500,000
Taxable Income for the year
900,000
MCIT
P
28,000
RCIT
P
270,000
Whichever is higher on RCIT or MCIT
Less Income taxes paid
190,000
Income tax due
P
80,000

(4) Statement 1: The minimum corporate income tax of a trading or manufacturing concern is based on
gross profit from sales.
Statement 2: The minimum corporate income tax of a service concern is based on net revenues or
receipts less direct costs of services.
(a)
(b)
(c)
(d)

Both statements are true

Both statements are false
The first statement is true but the second statement is false
The first statement is false but the second statement is true

(5)
(a)
(b)
(c)
(d)

Answer: (a)
The following are true, except one. Which is exception:
A domestic corporation is subject to MCIT on gross income from within and outside the Philippines.
A resident corporation is subject to the MCIT on gross income from within the Philippines.
A non-resident corporation is not subject to the MCIT
The optional gross income tax (GIT) applies to domestic and resident corporations.
Answer: (d)

(6) Selected cumulative balances were taken from the records of Flappy Bird Corporation, a domestic
corporation, in its fourth year of operations in 2013, which had an income tax refundable of P10,000
for a preceding year for which there is a certificate of tax credit.
The income tax due (or refundable) at the end of the year:
(a) P321,000
(b) P371,000
(c) P43,000
(d) P76,000
Answer: (c) P43,000 [page 2-19 quizzer on tax]
(7) Which of the following statements is wrong?
(a) The quarterly income tax of a corporation for any of the first, second or third quarters is filed, and the
tax due is paid, within sixty (60) days after the close of the quarter.
(b) The annual income tax return of a corporation is filed, and the tax due is paid on or before the
fifteenth day of the fourth month following the close of the taxable year
(c) There can be an income tax refundable in a quarterly income tax return of a corporation
(d) There can be an income tax refundable in the final income tax return of a corporation
Answer: (c)
(8) One of the following statements is wrong. Identify. The improperly accumulated earnings tax imposed
on corporations:
(a) Is calculated to force corporations to pay-out dividends
(b) Is computed on the improperly accumulated income over several years
(c) Is based on the net income per books after the income tax
(d) Is based on a statutory formula for improperly accumulated income
Answer: (b)
(9) All, except one, of the following, are not subject to the improperly accumulated earnings tax (IAET).
Which is the exception?
(a) Publicly-held corporations
(b) Banks and other financial intermediaries
(c) Insurance Companies
(d) Service Enterprises
Answer: (d)
(10)The following except one, give rise to the presumption that a corporation is improperly accumulating
profits. Identify the exception:
(a) The corporation is mere holding company
(b) The corporation is an investment company
(c) The corporation permits its profit to accumulate beyond the reasonable needs of the business
(d) The corporation is a service enterprise
Answer: (d)
(11)Angry Birds Inc., a domestic corporation, had the following selected data for 2009, the accumulated
earnings for which year the Bureau of Internal Revenue (BIR) considered to be improper:
Cost of sales
P
2,000,000.00
Minimum Corporate Income Tax
110,000.00

Business expenses
1,000,000.00
Interest on Philippine currency bank deposit
50,000.00
Capital gain on sale directly to buyer of shares
120,000.00
Dividend income from domestic corporation
60,000.00
Dividends declared and paid during the year
500,000.00
Maturing bonds in 2010
150,000.00
The improperly accumulated earnings tax (IAET) is:
(a) P175,000
(b) P264,300
(c) P256,300
(d) 380,300
Answer: (c) P256,300 [page 2-21 quizzer on tax]
(12)A mother corporation is abroad, with business in the Philippines through its branch in the Philippines.
Which of the following statements is wrong?
(a) In a year, the branch in the Philippines is subject to a profit remittance tax on its remittance of profits
to the mother company abroad, even if the profits from which the remittance was made was a prior
years profits.
(b) The profit remittance tax is fifteen (15%) percent of the total amount or profit for remittance, as
applied for with the bank.
(c) The bank with which the application for remittance was filed would be the withholding agent of the
Bureau of Internal Revenue
(d) Even activities registered with the Philippine Economic Zone Authority (PEZA), from the profits from
which the remittance is applied for, will be subject to the profit remittance tax.
Answer: (d)
(13)Statement 1: A private educational institution is a special corporation subject to income tax on all its
income at ten percent (10%)
Statement 2: A private educational institution may be treated as an ordinary corporation subject to all
the income tax rules on corporation.
(a) Both statements are true
(b) Both statements are false
(c) First statement is true but second statement is false
(d) First statement is false but second statement is true
Answer: (a)
(14)Statement 1: Corporations, agencies or instrumentalities owned or controlled by the government shall
pay the income tax as their counterpart private corporations.
Statement 2: The Government Service Insurance System and the Social Security System are subject to
income tax.
(a) Both statements are true
(b) Both statements are false
(c) First statement is true but second statement is false
(d) First statement is false but second statement is true
Answer: (c)
(15)Corporations exempt from income tax are enumerated under Section 30 of the National Internal
Revenue Code.
Statement 1: They are not subject to income tax on income received which are incidental or
necessarily connected with the purposes for which they were organized and are operating.
Statement 2: They are subject to income tax on income of whatever kind and character from any of
their properties, real or personal, or from any activity conducted for profit, regardless of the
disposition of such income.
(a) Both statements are true
(b) Both statements are false
(c) First statement is true but second statement is false
(d) First statement is false but second statement is true
Answer: (a)

(16)Which of the following is treated as a corporation?

(a) General partnership in trade
(b) General professional partnership
(c) Joint venture or consortium for construction project
(d) Joint venture or consortium for engaging in energy operations under a service contract with the
government.
Answer: (a)
(17)Temple Run Company is a general professional partnership for gaming applications, with Mr. Temple
and Mr. Run as partners and equally participating in the income and expenses. The following are the
data for the partnership and the partners in the calendar year:
The net taxable income of Temple Run Company is:
(a) P250,000
(b) P410,000
(c) P60,000
(d) P -0Answer: (d) Zero
(18)Using the information on question 17, what is the income tax due of Temple Run Company:
(a) P75,000
(b) P123,000
(c) P18,000
(d) P -0Answer: (d) Zero
(19)Using the information on question 17, what is the net taxable income of Mr. Temple:
(a) P80,000
(b) P250,000
(c) P125,000
(d) P -0Answer: (c)
(20)Using the information on question 17, what is the net taxable income of Mr. Run:
(a) P80,000
(b) P250,000
(c) P125,000
(d) P -0Answer: (c)
(21)Zombie Tsunami Corp., a domestic corporation, is engaged in architectural design services. The
following are pertinent data:
Gross receipts
P
5,000,000.00
Sales returns and allowances
200,000.00
Sales discounts
250,000.00
Cost of services
2,250,000.00
Deductions
1,000,000.00
The Optional Corporate Income Tax or Gross Income Tax of Zombie Tsunami is:
(a) P345,000
(b) P195,000
(c) P682,500
(d) P750,000
Answer: (c) P682,500
(22)Candy Crush Inc., a domestic corporation has the following data in 2013:
Gross Sales
P
4,000,000.00
Cost of Sales
1,500,000.00
Business Expenses
1,000,000.00
The Gross Income Tax of Candy Crush assuming it is a trading business:
(a) P375,000
(b) P600,000
(c) P480,000
(d) P125,000
Answer: (a)
(23)Using the same information on question 22, the Optional Corporate Income Tax of Candy Crush
assuming it is a service business:
(a) P375,000
(b) P600,000
(c) P480,000
(d) P125,000
Answer: (b)
(24)In 2006, Skater Boy Corporation, a resident foreign corporation, was on its sixth year of operation. The
following data pertain to its operation in the Philippines for the years 2006 and 2007:
The regular corporate income tax for 2006 is:
(a) P6,000
(b) P12,000
(c) P14,000

(d) P15,000
Answer: (a)
(25)The income tax due for 2006
(a) P6,000
(b) P12,000
(c) P14,000
(d) P15,000
Answer: (b)
(26)The minimum corporate income tax for 2007:
(a) P6,000
(b) P12,000
(c) P14,000
(d) P15,000
Answer: (c)
(27)The normal corporate income tax for 2007:
(a) P6,000
(b) P12,000
(c) P14,000
(d) P15,000
Answer: (d)
(28)Reasonable needs of the business is inconsistent with the concepts of IAET when:
(a) The direct correlation of anticipated needs to the accumulation of profits is proved.
(b) It is not necessary for the purpose of the business considering all the circumstances of the case
(c) The immediacy test under the American jurisprudence is adopted in Philippine jurisdiction
(d) Construed as immediate needs of the business including reasonable anticipated needs
Answer: (b)
(29)For purposes of determining the Improperly Accumulated Taxable Income for a taxable year, the
following, except one, are added to that years taxable income. Which one?
(a) Income exempt from tax
(b) Income excluded from gross income
(c) Income subject to final withholding tax
(d) The amount of net operating loss carry-over (NOLCO)
Answer: (d)
(30)For purposes of determining the Improperly Accumulated Taxable Income for a taxable year, the
following except one, are reduced from that years taxable income after appropriately adding certain
items. Which one?
(a) 10% improperly accumulated earnings tax
(b) Income tax paid/ payable for the taxable year
(c) Dividends actually or constructively paid/ issued
(d) Amount reserved for the reasonable needs of the business
Answer: (a)
(31)Which of the following is not true?
(a) For purposes of the MCIT, the taxable year in which business operations commenced shall be the year
in which the domestic corporation registered with the BIR.
(b) Firms which were registered with BIR in 1994 and earlier years shall be covered by the MCIT beginning
January 1, 1998.
(c) Firms which were registered with the BIR in any month in 1998 shall be covered by the MCIT in 2002
after the lapse of three (3) calendar years from 1998.
(d) None of the above
Answer: (d)
(32)The MCIT applies to which of the following domestic corporations?
(a) Proprietary Educational Institutions
(b) Non-profit Hospitals
(c) Depository banks under the Expanded Foreign Currency Deposit System (FCDS) on income from foreign
currency transactions with the local commercial banks.

(d) Firms that are taxed under a special income tax regime
(e) All of the above
(f) None of the above
Answer: (f)
(33)Which of the following need not be deducted from gross sales to arrive at gross income for purposes of
computing MCIT of a merchandising/ manufacturing concern?
(a) Sales returns and allowances
(b) Sales discounts
(c) Cost of sales
(d) None of the above
Answer: (d)
(34)Which of the following need not be deducted from gross sales to arrive at gross income for purposes of
computing MCIT of a service concern?
(a) Sales returns and allowances
(b) Sales discounts
(c) Cost of sales
(d) None of the above
Answer: (d)
(35)Which of the following need not be deducted from gross sales to arrive at gross income for purposes of
computing OCIT or GIT of a merchandising/ manufacturing concern?
(a) Sales returns and allowances
(b) Sales discounts
(c) Cost of sales
(d) None of the above
Answer: (d)
(36)Which of the following need not be deducted from gross sales to arrive at gross income for purposes of
computing OCIT or GIT of a service concern?
(a) Sales returns and allowances
(b) Sales discounts
(c) Cost of sales
(d) None of the above
Answer: (c)
(37)A PEZA-registered enterprise has a registered and an unregistered activity. The MCIT shall apply to
the:
(a) Registered activity
(b) Unregistered activity
(c) Both activities
(d) Neither registered nor unregistered activity
Answer: (b)
(38)The minimum corporate income tax of a domestic or resident corporation is:
(a) 15% of gross income
(b) 2% of gross sales
(c) 2% of gross income
(d) 2% of gross income for Domestic Corporations while Resident Foreign Corporations are exempted from
MCIT computation.
Answer: (b)
(39)The records of DOTA Inc., a closely-held corporation, show the following calendar years:
2011:
Gross Income
P
3,000,000.00
Less: Expenses
2,500,000.00
Net Income
500,000.00
2012:
Gross Income
5,000,000.00
Expenses
3,000,000.00
Other income
Rent, net of 5% withholding tax
475,000.00
Interest on money market, net
80,000.00

Inter-corporate dividends
500,000.00
Additional information:
Dividends paid
1,500,000.00
Tax payments, 1st to 3rd quarter
50,000.00
How much is the improperly accumulated earnings tax in 2012?
(a) P70,500
(b) P83,000
(c) P101,900
(d) P103,900
Answer: (b) P83,000
Use the following information for questions 40 to 44
Cut the rope Corporation, a domestic corporation, was registered with the BIR in 1997. The following
data on income taxes during the years 2004 to 2011 were made available.
(40)Income tax payable for 2004
(a) P25,000
(b) P100,000
(c) P75,000
(d) P -0Answer: (b)
(41)Income tax payable for 2005
(a) P130,000
(b) P150,000
(c) P20,000
(d) P-0Answer: (b)
(42)Income tax payable for 2009
(a) P60,000
(b) P150,000
(c) P105,000
(d) P-0Answer: (d)
(43)Income tax payable for 2010
(a) P8,000
(b) P40,000
(c) P32,000
(d) P -0Answer: (b)
(44)Income tax payable for 2011
(a) P150,000
(b) P50,000
(c) P118,000
(d) P -0Answer: (b)
(45)Bubble Blast Company, a domestic corporation, has the following income taxes computation for the
year 2013 as follows:
Year 2013:
RCIT
P50,000
MCIT
P12,000
The journal entry for in 2013 to record Income Tax is:
(a) Income Tax Expense
P
50,000
Income Tax Payable
P
50,000
(b) Deferred Charges MCIT
P
12,000
Income Tax Payable
P
12,000
(c) Income Tax Expense
P
50,000
Deferred Charges MCIT
12,000
Income Tax Payable
P
62,000
(d) Income Tax Expense
P
50,000
Deferred Charges MCIT
12,000
Income Tax Payable
38,000
Answer: (a)
(46)A tax imposed whether a corporation has zero or negative taxable income or whenever the minimum
income tax is greater than the normal income tax due from such corporation:
(a) Improperly accumulated earnings tax (IAET)
(b) Optional Corporate Income Tax (OCIT)
(c) Capital Gains Tax (CGT)
(d) Minimum Corporate Income Tax (MCIT)
Answer: (d)
(47)A corporation which was registered with the Bureau of Internal Revenue in May 2007 shall be covered
by MCIT in:
(a) 2008
(b) 2009
(c) 2010
(d) 2011
Answer: (d)
(48)The BIR form used by corporations to file quarterly income tax returns:
(a) 1702
(b) 1702Q
(c) 2550
(d) 2550Q

Answer: (b)
(49)The BIR form used by corporations to file its annual income tax return:
(a) 1702
(b) 1702Q
(c) 2550
(d) 2550Q
Answer: (a)
(50)According to tax code, the last payment of filing income tax returns for all corporations having
calendar year or fiscal year of reporting is:
(a) At the end of every taxable year
(b) Once the income tax return, regardless of the month, is completed, it may be filed at any day of the
year immediately following the taxable year
(c) Every April 15 immediately following the taxable year for all corporations having calendar year and
fiscal year of reporting
(d) On the 15th day of the fourth (4th) month immediately following the taxable year
Answer: (d)