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Income Taxation Schemes and Accounting Methods, Exams of Business Finance

California State Polytechnic University (CPP) - Pomona Business Finance

A comprehensive overview of the various income taxation schemes and accounting methods used in taxation. It covers topics such as ordinary gain taxation, regular income taxation, capital gains taxation, final income taxation, accounting methods like cash basis and accrual basis, and different types of income like passive income and active income. The document also delves into the specifics of filing income tax returns, including deadlines, accounting periods, and adjustment returns. Additionally, it presents detailed calculations and examples to illustrate the application of these concepts in real-world scenarios. This resource would be highly valuable for students and professionals studying or working in the field of taxation, accounting, or finance.

Typology: Exams

2024/2025

Available from 10/12/2024

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McGraw Hill's Income Taxation c4 Latest

Exam with 100% Correct Answers.

1. Which is not a scheme in taxing income?

A. Ordinary gain taxation

B. Regular income taxation

C. Capital gains taxation

D. Final income taxation - ✔✔A

2. Which is a correct statement regarding income taxes?

A. An item of income subjected to final tax can still be subject to

regular tax.

B. An item of income exempted from final tax is nevertheless

taxable to regular tax.

C. An item of income subjected to capital gains tax may be subject

to regular income tax.

D. An item of income exempted from tax is likewise exempt from

capital gains tax and regular income tax. - ✔✔D

3. Which is not a feature of final tax?

A. Covers certain passive income

B. Covers all capital gains

C. Withholding at source

D. None of these - ✔✔B

4. Which of the following properties when classified as capital asset is

subject to capital gains tax?

Partial preview of the text

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McGraw Hill's Income Taxation c4 Latest

Exam with 100% Correct Answers.

Which is not a scheme in taxing income? A. Ordinary gain taxation B. Regular income taxation C. Capital gains taxation D. Final income taxation - ✔✔A
Which is a correct statement regarding income taxes? A. An item of income subjected to final tax can still be subject to regular tax. B. An item of income exempted from final tax is nevertheless taxable to regular tax. C. An item of income subjected to capital gains tax may be subject to regular income tax. D. An item of income exempted from tax is likewise exempt from capital gains tax and regular income tax. - ✔✔D
Which is not a feature of final tax? A. Covers certain passive income B. Covers all capital gains C. Withholding at source D. None of these - ✔✔B
Which of the following properties when classified as capital asset is subject to capital gains tax?

A. Domestic stocks sold directly to buyer B. Real property C. Both a or b D. None of these - ✔✔C

Capital asset means A. Real properties used in business. B. Personal properties used in business. C. Real properties not used in business. D. Any property, real or personal, not used in business - ✔✔D
Which is not an item of passive income? A. Royalties B. Prizes C. Deposit interest income D. Professional income - ✔✔D
Which of the following accounting methods is most consistent with the lifeblood doctrine? A. Crop year method B. Cash basis C. Installment method D. Accrual method - ✔✔D
These are accounting techniques or conventions used to measure income A. Accounting methods

C. Installment payments, exclusive of downpayment, within the year the installment sale was made D. Total collections within one year from the date the installment sale was made. - ✔✔B

Income is reported by reference to the extent of project completion in A. Deferred payment method B. Installment method C. Percentage of completion method D. Completed contract method - ✔✔C
Which statement is correct? A. Dealers of real properties can use the installment method without limitation. B. Dealers of personal properties can use the installment method without limitation. C. Non-dealers of properties can use the installment method if initial payment exceeds 25% of the selling price. D. Dealers of properties can use the installment method only id initial payment does not exceed 25% of the selling price - ✔✔B
Leasehold income is recognized over the lease term in A. Outright method B. Cash basis C. Spread-out method D. Percentage of completion method - ✔✔C

Statement 1: the excess of mortgage assumed by the buyer over the basis of the properties sold is the amount of the gain on the sale.
Statement 2: any collection from an installment contract where the mortgage exceeds the tax basis of the properties received constitutes collection of income.
Which statement is true? A. Statement 1 only B. Statement 2 only C. Both statements are true. D. Neither statement is true. - ✔✔B
T/F. Both active income and passive income do not require direct participation of the taxpayer in earning the income. - ✔✔F
T/F. There are three types of gross income for taxation purposes. - ✔✔T
T/F. The three tax schemes are mutually inclusive in coverage. - ✔✔F
T/F. Regular income tax generally covers active income and capital gains. - ✔✔T

T/F. The first accounting period of a starting business will more likely be less than 12 months. - ✔✔T
T/F. The accounting period of a deceased taxpayer shall be terminated on December 31 in the year of death. - ✔✔F
T/F. Accrual basis and cash basis are the most common accounting method used in practice. - ✔✔T
T/F. Advanced income is an item of gross income for accrual basis taxpayers. - ✔✔T
T/F. Generally, prepayments are non-deductible in the current accounting period. - ✔✔T
T/F. Prepayments are deductible but in the future period they expire or are consumed in the business or trade of the taxpayer. - ✔✔T
T/F. The use of different methods for different businesses of the same taxpayer is permitted by law. - ✔✔T
T/F. Initial payment includes downpayment and installments in the year of sale. - ✔✔T

T/F. Contract price is synonymous with selling price. - ✔✔F
T/F. The crop year method is an accounting method. - ✔✔T
T/F. Under the percentage of completion method, gross income is reported based on the cash collections from the contract price. - ✔✔F
T/F. The depreciated value of the property upon termination of the lease constitutes income to the lessee. - ✔✔T
T/F. The withheld taxes on the income payments made by the taxpayers are tax credit against their income tax due. - ✔✔F
T/F. There are three types of income tax return for each income tax scheme/ - ✔✔F
T/F. All taxpayers, small or large, are encouraged to file their income tax return through the EFPS system of the BIR. - ✔✔F
T/F. Large taxpayers are under the supervision of the BIR Large Taxpayer Service. - ✔✔T

C. Crop year method matches cropping expenses with the income upon harvest. D. Crop year method recognizes cropping expenses when incurred and harvest income when realized. - ✔✔C

Which is an incorrect statement regarding the use of accounting period? A. Individuals can either choose the calendar year or fiscal year accounting period. B. The regular accounting period for any taxpayer is 12 months. C. Individual taxpayers are not allowed to report income using fiscal accounting period. D. Corporations may opt to use either calendar or fiscal accounting period. - ✔✔A
Under which of the following will short accounting period not arise? A. Change of accounting period by a corporate taxpayer B. Change of accounting period by an individual taxpayer C. Death of a taxpayer D. Dissolution and liquidation of a business - ✔✔B
Which is not a special feature of regular income taxation? A. Use of accounting methods B. Use of accounting periods C. Annual payment of income tax D. Final withholding tax at source - ✔✔D

An individual income taxpayer shall file his or her income tac return on or before the A. 15th day of the fourth month of the same calendar year B. 15th day of the fourth month of the following calendar year C. 15th day of the fourth month of the same fiscal year D. 15th day of the fourth month of the following fiscal year - ✔✔B
Anderson died on March 31, 2017. Which is a correct statement? A. Anderson's 2017 income tax return shall cover January 1, 2016 to December 31, 2017 B. Anderson's 2017 income tax return shall cover January 1, 2017 to March 31, 2017 C. Anderson's 2017 income tax return shall cover January 1, 2017 to December 31, 2017 D. Anderson's 2017 income tax return shall cover April 1, 2017 to December 31, 2017 - ✔✔C
Mrs. Julian started business on July 15, 2016. What should be the coverage of her 2016 income tax return? A. January 1 to July 15, 2016 B. July 15, 2016 to December 31, 2016 C. July 16, 2016 to July 15, 2017 D. January 1 to December 31, 2016 - ✔✔B
A corporation reporting on a fiscal year ending every March 31 shall file its 2017 income tax return no later than

During 2017, Klein corporation changed its accounting period to the calendar year. The adjustment return shall be filled on or before. A. April 15, 2017 B. July 15, 2017 C. April 15, 2018 D. July 15, 2018 - ✔✔C
Effective July 2, 2016, Rofelson company changed its fiscal year ending every March 31 to another fiscal year ending every August
1. An adjustment return shall be filed covering the period A. April 1 to July 2, 2016 B. April 1 to July1, 2016 C. April 1 to August 31, 2016 D. July 3 to August 31, 2016 - ✔✔C
Effective May 15, 2017, Tabuk, Inc. changed its fiscal year ending every April 30 to the calendar year. An adjustment return shall be filed covering the period A. May 1 to December 31, 2017 B. January 15 to December 31, 2017 C. January 1 to April 30, 2017 D. April 30 to December 31, 2017 - ✔✔A
Astercor, Inc. reported the following during the year:
- P400,000 proceeds of life insurance of an officer where Antercor is the beneficiary (P600,000 still uncollected)

P800,000 interest income, exclusive of P200,000 uncollected and accrued interest
P300,000 increase in value of investment in stocks

Compute the gross income under cash basis. A. P800, B. P1,000, C. P1,200, D. P1,400,000 - ✔✔A
Astercor, Inc. reported the following during the year:
- P400,000 proceeds of life insurance of an officer where Antercor is the beneficiary (P600,000 still uncollected)
- P800,000 interest income, exclusive of P200,000 uncollected and accrued interest
- P300,000 increase in value of investment in stocks
Compute the gross income under accrual basis. A. P800, B. P1,000, C. P1,200, D. P1,400,000 - ✔✔B
Berlin corp. reported the following data for 2019:
- total net sales made to customers were P2,000,000 in cash.

Using accrual basis, compute the total income subject to income tax. A. P1,060, B. P1,000, C. P960, D. P970,000 - ✔✔D Santiago, Inc. has the following receipts during 2018: From service billings to clients P400, Advances from clients + 100,000= Total cash collection. P500,
The P100,000 advances refer to services which will be rendered next year. Total uncollected billing increased from P100,000 on December 31, 2017 to P150,000 on December 31, 2018.
Compute the gross income using cash basis. A. P400, B. P450, C. P500, D. P550,000 - ✔✔C
Santiago, Inc. has the following receipts during 2018: From service billings to clients P400, Advances from clients + 100,000= Total cash collection. P500,

The P100,000 advances refer to services which will be rendered next year. Total uncollected billing increased from P100,000 on December 31, 2017 to P150,000 on December 31, 2018.
Compute the gross income using accrual basis. A. P400, B. P450, C. P500, D. P550,000 - ✔✔D
In 2019, Bright Inc. sold its parking lot for P2,400,000 payable on installment. The lot was previously acquired for P1,500,000. The buyer has an outstanding unpaid balance of P1,800,000 as of December 31, 2019, Bright's year-end.
Compute Exquisite's gross income in 2019 using the installment method. A. P900, B. P675,0 00 C. P225, D. P112,500 - ✔✔C
Exquisite corporation sold its old warehouse with carrying amount (tax basis) of P600,000 for P1,000,000. A downpayment of 155 was collected on July 1, 2019. Additional P150,000 installment payments were received as of December 31, 2019.

Installment sales P500,000; P800, Cost of installment sales 250,000; 440, Collections. 300,000; 600,

Lance's 2020 collection is inclusive of P100,000 accounts from
Using the accrual basis of accounting, compute Lancelot's gross income subject to income tax in 2020. A. P360, B. P320, C. P275, D. P250,000 - ✔✔A
Merville is a dealer in real properties. Merville requires 20% downpayment, and the balance is payable over 36 monthly installments starting on the last day of the month following the month of sale. Merville sold properties in 2019 and 2020 with the terms as follows:
- house and lot no. 1 was sold for P1,350,000 on November 11,
- house and lot no. 2 was sold for P1,800,000 on July 5, 2020. Both parties were sold at a gross profit rate of 40% based on the selling price.

Compute Merville's gross income subject to income tax in 2019 and 2020, respectively. A. P120,000; P720, B. P120,000; P864, C. P540,000; P864,000 - ✔✔B
In 2020, Mr. Marangley, a dealer of car, disposed a brand new sports utility vehicle (SUV) which costs P800,000 for P1,200,000, inclusive o under the following terms: July 1, 2020 - as down payment. P100, Monthly installment thereafter. 50,
Mr. Marangley will choose whichever favourable permissible income reporting method for him.
How much gross income is to e reported in 2020? A. P400, B. P250, C. P116, D. P108,219 - ✔✔C
In 2020, Mr. Marangley, a dealer of car, disposed a brand new sports utility vehicle (SUV) which costs P800,000 for P1,200,000, inclusive o under the following terms:

Income Taxation Schemes and Accounting Methods, Exams of Business Finance

Related documents

Partial preview of the text

Download Income Taxation Schemes and Accounting Methods and more Exams Business Finance in PDF only on Docsity!

McGraw Hill's Income Taxation c4 Latest

Exam with 100% Correct Answers.