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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 70SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
CHAPTER 10
VALUE-ADDED TAX
Problem 101
1. Falsesubject to VAT. This is considered as transaction deemed sale.2.
True3. Falsesale of real property classified as capital asset is not subject to VAT.
4. Falsesale of real property classified as ordinary asset is exempt from VAT if the amount oflot is P1,919,500 and below or house and lot if the price is P3,199,200 and below.
5. True6. Falseacquisition cost or current market price of goods whichever is lower.7. True8. Falsethe basis is the amount of debt cancelled.
9. True10. Falsesubject to VAT.
11.
True12.True13.True14.
Falsenot subject to output VAT. This is to be treated as operating expense.15. Falsenot transactions deemed sale.
Problem 102
1. Falsesubject to VAT.2.
True3.
True4. True
5. Falsethe exemption is applicable only to residential lot and the amount of selling priceshould not exceed P1,919,500 per residential lot.
6.
True7. Falsethis would refer to gross selling price.8.
Falsedeemed inclusive of VAT.9.
True10.True11. Falsedisregarded as part of the initial payment.12.True13.True14.True15.
Falseoriginal estate and not subject to VAT.
Problem 103 Problem 104
1.D 1.C2.A 2.D3. B 3.A
4. C
4.
C5. C 5.D
6.D 6.B7. B 7.A & B8.A 8.D9.
A
9.
B
10. A 10. B
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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 71SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 5 A
Warehouse P4,000,000
Business delivery trucks
500,000
Amount subject to VAT
P4,500,000
Problem 10 6 B
Sale of furniturewithin P1,800,000Furniture taken from inventory for personal use 200,000
Amount subject to 12% VAT P2,000,000
Problem 10 7 D
Zero. The person responsible to pay the VAT is the buyer. Therefore, Kamukamo is not liable topay VAT to the Philippine Government. Corona Enterprise is responsible to remit to the BIR therelated VAT on the purchase transaction.
Problem 10 8 A
Raw materials used P400,000Direct labor
200,000
Factory overhead 100,000Excise tax 70,000Mark-up
430,000
Total amount subject to VAT P1,200,000
Output VAT (P1,200,000 x 12%) P144,000Less: Input VAT from purchases (P896,000/9.333) P96,000
Input VAT from factory overhead 4,000 100,000
Net VAT payable P 44,000
Problem 10 9 B
Cash sales of goods to regular customers P1,500,000Credit sales of goods to regular customers 500,000
Merchandise use by the owner for personal consumption (P200,000 x 70%)
140,000Reasonable taxable base of sales for VAT purposes P2,140,000
Problem 10 10 D
Gross sales:Cash sales P 500,000Credit sales 800,000
Sales returns
( 100,000)
Sale of obsolete inventories 60,000Consigned goods (unsold after 90 days) 100,000
Total P1,360,000Multiplied by VAT rate
12%
Output VAT P 163,200
Problem 10 11 C
Consumption of inventory by the manager at cost
P
100,000
Merchandise used to pay dividends at cost 600,000
Payment to creditors at the amount of debt cancelled 800,000Sale of scrap materials at market price
40,000
Total unreported additional sales P1,740,000Multiplied by VAT rate 12%
Output VAT P 208,800
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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 72SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 12 A
Output VATJanuary 1 to Sept. 30, 201A P144,000
Output VATOctober 1 to Dec. 31, 201A (P700,000/9.333)
75,000
Total output VAT
P219,000
Less: Input VAT from:Purchases (P1,120,000/9.333) P120,000Operating expenses (P4,200 + P1,800) 6,000 126,000
Net VAT payable P 93,000
Problem 10 13 C
Merchandise inventory P 80,000Equipment 160,000Furniture and fixtures 60,000
Total assets P300,000Multiplied by VAT rate 12%
Output VAT P 36,000Less: Input VAT 16,000
Net VAT payable
P
20,000
Problem 10 14 A
Zero. Transfers of assets as a result of merger or consolidation are not considered transactionsdeemed sales. These are just transfers in form, not in substance. (RMC No. 47-99)
Problem 10 15 NOT IN THE CHOICES
Sales (P1,500,000/60%)
P2,500,000
Obsolete inventory sold at 80% discount, at cost (P100,000 x 20%) 20,000Consigned goods beyond 60 days at cost 400,000
Total taxable base P2,920,000Multiplied by VAT rate 12%
Output VAT P 350,200
Problem 10 16 C
Cash sales
P135,000
Add: Net credit sales:Gross amount, net of trade discount
(P365,000 x 90%) P328,500Less: Sales return (P65,000 x 90%) 58,500 270,000
Taxable base P405,000Multiplied by VAT rate 12%
Output VAT P 48,600
Problem 10 17
1.
Letter D
Sale of residential lot not exceeding P1,919,500 is VAT-exepmt.
2. Letter A
VAT (P2,000,000 x 12%)
P240,000
Problem 10 18 D
1 lotclass A (P3,200,000 x 12%)
P384,000
2 Commercial lots (P4,480,000/9.333) 480,000Total output VAT P864,000
Note: The basis of VAT for l lot class A is the fair market value, which is higher than the selling price. If theFMV is higher than the selling price, the FMV is VAT exclusive. (Rev. Regs. No. 4-2007)
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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 73SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 19
1. Letter D
Zero, because the sale is not subject to VAT. Aside from the property is a capital asset, it is aresidential house and lot with a selling price not exceeding P3,199,200.
2. Letter A
Output VAT (P3,500,000 x 12%) P420,000
Problem 5 20 C
VAT on down paymentNovember 200A (P600,000 x 4M/3M) x 12% P96,000Add: December 200A VAT on monthly collection (P20,000 x 4M/3M) x 12% 3,200
Output VAT on the year of sale P99,200
Problem 5 21 B
Second installment
P3,750,000
Add: Surcharge (P3,750,000 x 5%) P187,500Interest (P3,750,000 x 12% x 3/12) 112,500 300,000
Taxable base P4,050,000
Multiplied by VAT rate
12%Output VAT
P
486,000
Problem 10 22 A
Output VATyear 3 (P2,940,000/9.333) P315,000Less: Creditable input VATyear 3 P200,000
Excess creditable input VATyear 2 (P315,000P350,000) 35,000 235,000
Net VAT payable P 80,000
Problem 10 23 A
Output VAT (P7,500,000 x 12%), higher amount P900,000Less: Creditable input VATyear 1
300,000
Net VAT payable (initial payment exceeds 25% = considered cash sales) P600,000
Problem 10 24 C
Output VAThigher (P5,000,000 x 12%)
P600,000Less: Output VAT already paid (P3,360,000/4) x 3 270,000
Output VAT still to be paid
P330,000
Problem 10 25 B
2,000 Sacks of cotton and cotton seedlings at P900 each P1,800,000Sale of woods and charcoal 400,000
Total P2,200,000Multiplied by VAT rate
12%
VAT payable P 264,000
Problem 10 26
Cost of goods manufactured (P200,000 + P100,000 + P100,000) P400,000Less: Unsold goods manufactured 15,000
Total cost of goods sold P385,000
Add: Excise tax (P385,000 x 20%)
P
77,000
Mark-up (P385,000 x 50%)
192,500
269,500
Total sales P654,500Multiplied by VAT rate 12%
Output VAT P 78,540Less: Input VAT from:
Raw materials purchase per invoice (P336,000/9.333) P 36,000Repair of store office 450Supplies purchase per invoice (P28,000/9.333) 3,000 39,450
VAT payable P 39,090
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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 74SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 27
Cash sales P 800,000
Add: Credit sales
P200,000
Installment sales collected
100,000
Deemed sales (P20,000 + P180,000) x 60% 120,000 420,000
Total sales including deemed sales P1,220,000Multiplied by VAT rate 12%
Output VAT P 146,400Less: Input VAT:
Purchases including VAT (P448,000/9.333) P 48,000Input VAT credit from previous month 36,400 84,400
Net VAT payable P 62,000
Problem 10 28
Total domestic sales P1,000,000Inventory consumed for personal use 100,000
Total sales subject to 12% VAT P1,100,000Multiplied by VAT rate
12%
Output VAT P 132,000
Problem 10 29
Output VAT (P500,000P100,000) x 12% P48,000Less: Input VAT per record
P25,000
Business tax paid 10,000 35,000
Remaining unpaid VAT P13,000
Problem 10 30
1. Sales P5,000,000Less: Sales returns 100,000
Vatable sales P4,900,000
Output VAT (P4,900,000 x 12%)
P
588,000Less: Input VAT from:
Purchases/services (P1,120,000/9.333) P120,000Importation (P600,000 x 12%) 72,000Capital goods (P1,344,000/9.333)/ 5 years 28,800 220,800
Net VAT payable P367,200
2. Sales P5,000,000Less: Sales returns P100,000
Sales discounts 200,000 300,000
Net sales P4,700,000Less: Cost of sales (P1,000,000 + P600,000) 1,600,000Gross income P3,100,000Less: OSD (P3,100,000 x 40%) 1,240,000Net taxable income P1,860,000Multiplied by corporate income tax rate
30%
Net taxable income P 558,000
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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 75SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 31
1. Sales P5,000,000
Consigned goods to Victorias (65 days)
500,000
Vatable sales
P5,500,000
Note: The accounts receivable is assumed to have been included as part of sales.
Raw materials used (P1,880,000 x 60%) P1,128,000Increase in inventoryraw materials 360,000
Total purchases P1,488,000
Output VAT (P5,500,000 x 12%) P660,000Less: Input VAT from expenses P36,000
Presumptive input VAT (P1,488,000 x 4%) 59,520 95,520
Net VAT payable P564,480
2. Actual sales P5,000,000Less: Cost of sales
1,880,000
Gross income P3,120,000Less: OSD (P3,120,000 x 40%)higherbetter 1,248,000Net taxable income P1,872,000Multiplied by corporate income tax rate
30%
Income tax due P 561,600
Note: It is assumed that Sardines Manufacturing is a corporation.
Problem 10 32
1. Output VAT from deemed sales (P100,000 + P400,000) x 12% P60,000
2. Output VAT P60,000Less: Input VAT 20,000
VAT payable
P40,000
Problem 10 33
Output VAT (P11,200,000/1.12) x 12% P1,200,000Less: Input VAT from:
Purchases (P7,840,000/1.12) x 12% P840,000Unutilized input VAT of M Corporation 300,000 1,140,000
Net VAT payable P 60,000
Problem 10 34
1.Total Output VATFirst year: (P2,500,000 x 20%) = P500,000 x 12% P 60,000
Second year: (P2,000,000 x ) x 12% 120,000(P2,000,000 x 6% x 12%) 14,400
Third year: (P1,000,000 x 12%) 120,000(P1,000,000 x 6% x 12%) 7,200
Total Output VAT P321,600
2. Additional Output VATRequired VAT (P3,000,000 x 12%) P360,000Less: Previously paid VAT from first to third year 321,600Additional Output VAT P 38,400
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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 76SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Problem 10 35
1. Year of sale
Output VAT (P100,000 x 12%)
P 12,000
2. Second yearOutput VAT (P200,000 x 12%) P 24,000
(P400,000 x 6% x 12%) 2,880
Total Output VAT2ndyear P 26,880
3. Third year
Output VAT (P200,000 x 12%) P 24,000(P200,000 x 6% x 12%) 1,440
Total Output VAT3rdyear P 25,440
Problem 10 36
1. VAT (P10M x 12%) P1,200,000Real property sales subject to 25% rule.Sales of house and lot of P2,500,000 & below is
exempt from business taxes.
2. Cash sales (P10,000,000 + P400,000) P10,000,000Installment sales
400,000
Total sales P10,400,000Less: Cost of sales of:
Cash sales P6,000,000Installment sales (P1,500,000 x 4/20) 300,000 6,300,000
Gross income P4,100,000Less: Operating expenses 2,000,000
Net income P2,100,000Multiplied by corporate normal income tax rate 30%
Income tax due P 630,000
Problem 10 37
1.
Net income (P570,000/30%)
P1,900,000
Less: Gain on sale of capital asset 50,000
Net operating income P1,850,000Add: Cost of sales (P120,000/12%) P1,000,000
Sales discounts 150,000Operating expense before taxes 990,000Community tax 10,000 2,150,000
Amount subject to VAT P4,000,000
2. Output VAT (P4,000,000 x 12%) P 480,000
3. Output VAT P 480,000Less: Input VAT 120,000
VAT payable
P 360,000
Problem 10 38
1. Gross income P12,300,000Add: Cost of sales (P10,000,000 + P150,000P850,000) 9,300,000
Net sales (P12,300,000 + P9,000,000) P21,600,000Add: Sales discountsdue to prompt payments 200,000
Vatable base P21,800,000Multiplied by VAT rate 12%
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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 77SUGGESTED ANSWERS
Chapter 10: VAT ON GOODS OR PROPERTIES
Output VATLess: Input VAT
Net VAT payable
2. Gross income
Less: OSD (P12,300,000 x 40%) higher deductionallowed Net taxable income
Multiplied by normal taxrate Income tax due
Problem 10 39
Cash salesSales on accountInstallment salescollection (P500,000 x 20%)Transactions deemed sale:
Owners personal use (P50,000 x 70%)Consigned goods (P100,000 x 70%)
Total salesMultiplied by VAT rate
Output VATLess: Input VAT from purchases P48,000
Input VAT credit from previous month 36,000Input VAT from imported machines used in business
(P200,000 x 150%) x 12% 36,000
Net VAT payable
Note: The transactions deemed sale may be reduced by 30%. (R.A. 9337)
Problem 10 40
1. SalesTransactions deemed sale:
Consigned goods (P560,000 x 70%) P392,000
Inventory used to pay dividends (P400,000 x 70%)
280,000Total
Less: Sales returns and allowancesAmount subject to VAT
Multiplied by VAT rateOutput VAT
2. Actual net salesLess: Cost of salesGross profit
Less: OSD (P4,000,000 x 40%)higherbetter*Net taxable incomeMultiplied by corporate income tax rate
Income tax due
P 2,616,0001,200,000
P1,416,,000
P12,300,000
4,920,000 P7,380,000
30%P2,214,000
P1,000,000
300,000
100,000
35,000
70,000P1,505,000
12%P 180,600
120,000P 60,600
P10,000,000
672,000P10,672,000
300,000
P10,372,000
12%P 1,244,640
P9,500,000
5,500,000
P4,000,000
1,600,000
P2,400,000
30%P 720,000
*Note: The actual operating expense is lower than OSD because the bad debts is based on percentof receivable which is not allowed as deduction. Also, the interest expense deductible would onlybe P34,800.
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