Multiple Choice-Problems

MCIT of a Manufacturing Concern

For taxable year 2019, the company's sixth year of operations, the records of Mega
Specialties Corp., a domestic corporation, show the following:
Gross Sales
Sales Returns & Allowances
Sales Discounts
Cost of Goods Manufactured & Sold Operating Expenses
1. Net sales
a P2,463,500
2 Gross income
a. P2.463,500
b. P2,436,000
P2,463,500 27,500
42,750
1,313,600
586,040
CP2,420,750
d. P2,393,250
b. P2,393,250
3. Minimum corporate income tax
P21,593
b. P26,272
c. P1,313,600
d P1,079,650
c. P47,865
Charity Inc., a domestic company, has the following financial data for 2019, its fifth year
of operations:
Gross Sales
Sales Returns & Allowances
Sales Discounts
Operating Expenses
Minimum Corporate Income Tax
4. Net sales
P2,871,900
P2,956,200
33,000 51,300
703,248
25,912
d. P49,270
b. P2,904,900
5 Cost of goods manufactured and sold
a. P2,956,200
6. Gross income
a. P2,956,200
b. P2,871,900
c. P2,923,200
d. P2,956,200
(C) P1,576,320
d. P1,295,580
b. P2,871,900
c. P1,576,3
d. P1,295,580
Multiple Choice Problems
MCIT of a Service Concern Under Cash & Accrual Basis
Demi Bridal Consultancy, a domestic corporation, adopts the cash-basis of accounting has the
following financial data for the year 2019, its fifth year of operations:
Gross Receipts
Sales Returns & Allowances
Sales Discounts
Cost of Services
Operating Expenses
1. Gross income
3. P250,000
P250,000
5,000
7,500
95,000 62,500
c. P237,500
b. P242,500
Minimum corporate income tax
P2,850
b. P4,750
d.) P142,500
d. P5,000
c. P4,850
3. Minimum corporate income tax under the accrual basis
a. P82,500
b) P5,000
c. P4,750
Austerity Inc., a domestic company, employs the cash-basis method. The following financial
data appear in its records for the year 2019, its sixth year of operations:
Gross Receipts
Sales Returns & Allowances
Sales Discounts
Operating Expenses
Minimum Corporate Income Under the Cash-Basis
4. Cost of services
P71,250
5. Gross income
a. P71,250
b. P106,875
P187,500
3,750
5,625
46,875
2,138
Tax
2.
d. P2,850
c. P178,125
d. P187,500
P106,875
c. P178,125
6. Minimum corporate income tax under the accrual basis
a. P1,425
b. P2,138
c. P3,562
d. P187,500
P3,750
Problems Normal Tax Versus MCIT
Miscellaneous Corp., a domestic corporation, is on its fifth year of operations in 2021. It
has the following data:
Sales
Cost of Sales
Business Expenses
1,075,000 1,125,000
1 Gross income:
(150,000) 1,275,000
2. Normal tax taxable income: 150,000
3. Income tax due:
37,500
In 2019, the company's fourth year of operations, Destiny Inc., a domestic corporation, has
the following financial data:
Business Expenses
Minimum Corporate Income Tax
P975,000 25,000
4. Gross income:
1 250 000
5. Normal tax taxable income:
275,000
6. Income tax due:
82,500
Problems
Normal Tax Versus MCIT
In 2021, Variety Corp., a resident foreign corporation, was on its sixth year operations. The
following data pertain to its operations in the Philippines for the year 2021 and 2022)
2021
2022
Gross Profit from Sales
Business Expenses
1. Normal income tax for 2021
P620,000 530,000
(90000) 28,500
P720,000 612,000
2 Income tax due for 2021:
22,500
3. Minimum corporate income tax for 2022:
(2 200) (14 400)
7, 200
12
4. Income tax due for 2022:
23,000
Fulfillment Inc., a resident foreign corporation, is on its sixth year of operations in 2018
For its operations in the Philippines, the following appear in its 2018 and 2019 records:
2018
2019
Business Expenses
Normal Income Tax
P795,000 31,500
($2,500)
P918,000 39,600
5. Gross profit from sales for 2018
900,000
6. Income tax due for 2018:
(7,450) (31,500
30%
MCIT
18,000
7. Gross profit from sales for 2019: (957, 600) 1,050,000.
8. Income tax due for 2019: (11, 880) 39,600
MCIT 21,000
Grace Company is a resident foreign corporation. Taxable year 2018 is its fourth year of
operations. For the years 2018 and 2019, Grace's Philippine operations yield the following
financial data:
2018
Business Expenses
Minimum Corporate Income Tax
9. Normal tax taxable income for 2018
P325,000 7,000
2019
P360,000 8,000
10. Income tax due for 2018:
7.500
11. Normal tax taxable income for 2019:
12. Income tax due for 2019:
Problems
Humility Inc. is a domestic corporation engaged in merchandising business. For the calendar
year 2018, the company's sixth year of operations, the following financial data appear in its
records:
Dividend Received from a Domestic Corporation Provision for Bad Debts
P11,500 5,750
After considering the above items, Humility has a gross profit from sales of P517,500 and net
income per books of P207,000.
For the first three quarters, Humility pays P32,775 in income taxes. On Apr. 20, 2019,
Humility files its income tax return. Due date is Apr. 15, 2019. The BIR imposes a compromise
penalty of P8,000.
1. Taxable income:
283,475
2. Minimum corporate income tax: 2,177
3. Income tax still due:
$5,043
4. Surcharge for late filing of return:
5. Total amount payable:
3
4
Problems
MCIT vs. Normal Tax of a Merchandising Business
Hope Corporation is a trading company organized in the Philippines. Calendar year 2018 is its
fifth year of operations. It has the following financial data for 2018:
Dividend Received from a Domestic Corporation Interest Received on Government Bonds, Net of
20% Tax
Interest on Money Borrowed to Buy Government Bonds Income Tax Payments for the First Three
Quarter
Provision for Bad Debts
255 24,225
4,250
After considering the above items, the following balances appear in the company
records: 153,000
382,500
the
tax
Gross Profit from Sales Net Income per Books
Hope was charged a compromise penalty of P5,500 after failing to file its income return on
the due date, Apr. 15, 2019. The return was filed on Apr. 22, 2019.
1 Taxable income:
2. Minimum corporate income tax:
3. Normal income tax:
4. Income tax still due:
5. Delinquency interest for late filing of return:
6. Total penalties:
7. Total amount payable:
Problems
Accounting Treatment of Excess MCIT
Salcedo Corporation, a domestic corporation, has been operating its business since 2008 The
corporation adopts the calendar year as its taxable year. The accountant made a schedule
comparing the normal income tax and the MCIT of the company for the eight-year period the
company is covered by the MCIT:
2013
P300,000
260,000
P40,000
2014
#380,000
2015
P600,000
300.000 P300,000
2016
P100.000
20.000 P 80,000
2017
P120,000
30,000 P 90,000
2018
P80,000
16,000 P64,000
MOT
Normal Tax
P200,000
50.000 P10,000 P150,000
From year 2012 to 2019, prepare the appropriate accounting entries to record:
1 income tax liability using the normal income tax rate
2 deferred charges relative to excess MCIT over normal income tax
3. payment of income tax
4. application of excess MCIT against normal income tax liability
5 expired portion of deferred charges recognized
2015 P100.000
2.000
P98,000
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