Solution manual transfer and business taxes by valencia CHAPTER 9 VAT TAXABLE TRANSACTIONS

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 44 Chapter 9: BUSINESS TAXES CHAPTER VALUE-ADDED TAX Problem 9–1 True or False True True False – R.A 9361 removed the application of 70% limit of Input VAT True True False – The VAT rate should be 12% True False – Record purchases excluding VAT because the business is VAT-registered True 10 True 11 True 12 True Problem 9–2 True False – Not deemed sales because the inventory is used in business, hence, not subject to 12% VAT True True True True False – Cash receipts exclude receivables True False – Applicable only on the first year as VAT business 10 False – 4% of prime materials, not all purchases Problem 9–3 C B D A C D A D B 10 C Problem 9–4 B D D D B C B C C Problem – D Zero M is merely a collecting agent of the BIR, not a direct payee of the VAT VAT is an indirect tax Problem – D Business tax (P1,500,000 x 3%) Problem – C Output VAT-within (P833,333 x 80% x 12%) Less: Input VAT within from: Service cost Supplies (P22,400/9.3333) P45,000 P80,000 P40,000 2,400 42,400 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 45 Chapter 9: BUSINESS TAXES Net VAT payable P 37,600 Problem – A VAT payable (P1,600,000 x 12%) P192,000 Problem – D Gross sales: Cash sales Credit sales Sales returns Sales discounts Consigned goods (unsold after 90 days) Total Multiplied by VAT rate Output VAT P 500,000 800,000 ( 100,000) ( 50,000) 100,000 P1,250,000 12% P 150,000 Problem – 10 B Sales Less: Trade discounts per invoice Net sales subject to VAT Multiplied by VAT rate Output VAT Less: Creditable input VAT VAT payment Remaining unpaid VAT P500,000 100,000 P400,000 12% P 48,000 P 32,000 10,000 42,000 P 6,000 Note: The sales commission is an operating expense and should not be an item to compute for the net sales subject to VAT Problem – 11 A None, because the sale is not a business sale Problem – 12 D Output VAT (P450,000/10%) x 12% Less: Input VAT (P5,062,400/9.3333 Net VAT payable P540,000 542,400 (P 2,400) Problem – 13 A Output VAT (P425,600/9.3333) Less: Input VAT (P448,000/9.3333) Input VAT carry-over Problem – 14 A Total machines – imported (P100,000 P300,000) Add: Excise tax (P600,000 x 50%) Total Multiplied by VAT rate VAT paid on importation P45,600 48,000 P 2,400 + D Output VAT (P1,000,000 x 12%) Less: Creditable Input VAT Machine (P200,000 + P100,000) x 12% Machine (P300,000 + P150,000) x 12% VAT payable P200,000 + P 600,000 300,000 P 900,000 12% P 108,000 P 120,000 P36,000 54,000 90,000 P 30,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 46 Chapter 9: BUSINESS TAXES Problem – 15 B Amount as basis of VAT (P7,168/1.12) Divided by (100%-20%) Original amount of sales P6,400 80% P8,000 Output VAT (P7,168 – P6,400) P768 Problem – 16 A Creditable Input VAT for the first quarter (P2,240,000/9.333) P240,000 Note: Machine is an inventory; hence, not a capital good subject to depreciation Consequently the amortization of input VAT for machine and machine is not applicable Problem – 17 D Creditable Input VAT (P84,000/9.3333) 9,000 Problem – 18 A Purchases per VAT invoice amount (P140,000/9.3333) Payments for VAT person’s services inclusive of VAT (P1,232/9.3333) Payment for services of VAT person, net of VAT (P917 x 12%) Total available Input VAT Problem – 19 C From domestic sales (P110,000 + P55,000) x 12% From purchases from VAT person (P66,000 x 12%) Problem – 20 D Output VAT (P672,000/9.3333) Transactions deemed sale [(P20,000 + P8,000)/70%] x 12% Total Output VAT Less: Input VAT per record Net VAT payable Problem – 21 Total Output VAT (P1,344,000/9.3333) Output VAT P19,800 Input VAT P7,920 P72,000 4,800 P76,800 75,000 P 1,800 P 144,000 Total Output VAT P140,000 Less: Input VAT VAT purchase invoice amount (P840,000/9.3333) Net VAT payable 90,000 P 54,000 Problem – 22 Output VAT (P880,000 + P720,000) x 12% P 15,000 132 110 P 15,242 P 192,000 Output VAT P 192,000 Less: Input VAT (P1,200,000 x 12%) Net VAT payable 144,000 P 48,000 Problem – 23 Output VAT (P125,000 x 12%) P 15,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 47 Chapter 9: BUSINESS TAXES Input VAT (P84,000/9.3333) P 9,000 Note: The sales is multiplied by 12% because it is not per invoice while the purchase is divided by 9.3333 because the purchase is per invoice Problem – 24 Total sales price (P20 x 10) Add: VAT (P200 x 12%) Total sales invoice amount P 200 24 P 224 Problem – 25 VAT on the sale of real property (P3,000,000 x 12%) P360,000 Problem – 26 Assume that purchases are made from a VAT-registered supplier Cost of goods manufactured (P200,000 + P100,000 + P100,000) Less: Unsold goods manufactured Total cost of goods sold Add: Excise tax (P385,000 x 20%) Mark-up (P385,000 x 50%) Total sales Multiplied by VAT rate Output VAT Less: Input VAT from: Raw materials purchase per invoice (P330,000/9.3333) Repair of store office Supplies purchase per invoice (P28,000/9.3333)) VAT payable Problem – 27 Total sales Add: Regular installment sales Deemed sales (P30,000 + P100,000) Total sales including deemed sales Multiplied by VAT rate Output VAT Less: Input VAT: Purchases including VAT (P440,000/9.3333) Input VAT credit from previous month Net VAT payable P400,000 15,000 P385,000 P 77,000 192,500 269,500 P654,500 12% P 78,540 P 35,357 450 3,000 38,807 P 39,733 P 800,000 P100,000 130,000 230,000 P1,030,000 12% P 123,600 P 47,143 36,000 P 83,143 40.457 Problem – 28 Assume that the export sales are foreign denominated Total domestic sales Inventory consumed for personal use (P100,000 x 120%) Total sales subject to 12% VAT Multiplied by VAT rate Output VAT P1,000,000 120,000 P1,120,000 10% P 134,400 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 48 Chapter 9: BUSINESS TAXES Problem – 29 Output VAT from deemed sales (P100,000 + P400,000) x 12% P60,000 Output VAT Less: Input VAT VAT payable Problem – 30 Total Output VAT First year: P60,000 20,000 P40,000 (P2,500,000 x 20% x 12%) Second year: (P2,500,000 x 80% x ½ ) x 12% (P2,500,000 x 80% x 6% x 12%) Third year: (P2,500,000 x 80% x ½ ) x 12% (P1,000,000 x 6% x 12%) P 60,000 120,000 14,400 120,000 7,200 P321,600 Total Output VAT Additional Output VAT Required VAT (P3,000,000 x 12%) Less: Previously paid VAT from first to third year Additional Output VAT P360,000 321,600 P 38,400 Problem – 31 Down payment per contract price (P3,300,000 x 30%) x 12% Advanced collection (P410,000 x 12%) Output VAT P118,800 49,200 P168,000 Note: Billings are still uncollected amount As a rule, the business tax is based on gross receipts or collection for service business Problem – 32 Year of sale Output VAT (P100,000 x 12%) P 12,000 Second year Output VAT (P400,000 x 12%) (P400,000 x 12% x 12%) Total Output VAT – 2nd year P 48,000 5,760 P 53,760 Third year Output VAT (P200,000 x 12%) (P200,000 x 12% x 12%) Total Output VAT – 3rd year P 24,000 2,880 P 26,880 Problem – 33 VAT to be withheld (P6,720,000/9.333) Contract price Less: VAT withholding Final withholding income tax (P6,000,000 x 7.5%) Net remittance to Japan Inc P 720,000 P6,720,000 P 720,000 450,000 1,170,000 P5,550,000 Problem – 34 Withholding VAT (P50,000,000 x 40%) x 12% P2,400,000 P5,000,000 Final withholding tax (P50,000,000 x 40%) x 25% BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 49 Chapter 9: BUSINESS TAXES Share of Dragon Films (P50,000,000 x 40%) Less: VAT withholding Final withholding income tax Net remittance to Japan Inc P20,000,000 P 2,400,000 5,000,000 7,400,000 P12,600,000 Problem – 35 Importation for business use Add: Customs duties (P1,000,000 x 50%) Total Add: Excise tax (P1,500,000 x 10%) Total Multiplied by VAT rate Creditable Input VAT P1,000,000 500,000 P1,500,000 150,000 P1,650,000 12% P 198,000 Problem – 36 Local sales (P1,500,000 x 60%) Deemed sales (P1,500,000 x 10%) Total sales Multiplied by VAT rate Total Output VAT P 900,000 150,000 P1,050,000 12% P 126,000 Total creditable Input VAT (P1,100,000 x 12%) P 132,000 Net VAT refund (P126,000 – P132,000) (P 6,000) Problem – 37 Output VAT (P1,456,000/9.3333) P156,000 Input VAT (P1,100,000/9.3333) P117,858 Problem – 38 Output VAT Less: Input VAT from: Purchases Carry-over from last quarter Capital goods Creditable input VAT for next quarter P200,000 P180,000 30,000 10,000 220,000 (P 20,000) Problem – 39 Input VAT from purchases for business (P110,000/9.3333) Input VAT from importation (P71,500/9.3333) Creditable Input VAT for the period P 11,786 7,661 P 19,447 Creditable Input VAT for the period P 15,000 Note: The creditable Input VAT for the period is the same with the Output VAT for the period The excess of the creditable VAT can be claimed in the next period Problem – 40 Purchases from VAT person (P250,000 x 12%) Purchases from Non-VAT person (P3,000 x 0) Payments to VAT services (P55,000/9.3333) Payments to Non-VAT services (P11,000 x 0) Total Input VAT P 30,000 - 5,893 - P 35,893 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 50 Chapter 9: BUSINESS TAXES Output VAT (P220,000/9.3333) Less: Creditable Input VAT Net VAT payable (refundable) P 23,572 15,893 (P 7,679) Problem – 41 Input VAT on Depreciable Capital Goods from purchase of Truck (P1,100,000/9.3333) Processing machine (P1,430,000/9.3333)/60 x Total Input VAT for the last quarter P117,858 2,554 P120,512 Note: The Input VAT from the purchase of truck should not be amortized because its cost does not exceed P1,000,000 Problem – 42 Output VAT Less: Input VAT – presumptive (P500,000 x 4%) Input VAT from importation (P1,320,000/9.3333)/60 Net VAT payable P 30,000 P 20,000 2,357 Output VAT Less: Input VAT – presumptive (P500,000 x 4%) Input VAT from importation (P1,320,000/9.3333)/60 Net VAT payable 22,357 P 7,643 P 50,000 P 20,000 2,357 Problem – 43 Output VAT (P900,000 x 12%) Less: Transitional Input VAT (P100,000 x 2%) Presumptive Input VAT (P80,000 x 4%) Input VAT from operating expenses Net VAT payable 22,357 P 27,643 P108,000 P2,000 3,200 2,000 7,200 P100,800 Problem – 44 Output VAT Input VAT from purchases of: Goods Capital goods Net VAT payable (refundable) Problem – 45 Net income (P570,000/30%) Less: Gain on sale of capital asset Net operating income Add: Cost of sales (P120,000/12%) Sales discounts Operating expense before taxes Community tax Vatable base – Sales subject to VAT January P120,000 February P120,000 March P120,000 (94,286) P 25,714 (106,072) P 13,928 (106,072) (58,929) (P45,001) P1,900,000 50,000 P1,850,000 P1,000,000 150,000 990,000 10,000 2,150,000 P4,000,000 Output VAT (P4,000,000 x 12%) P 480,000 Output VAT Less: Input VAT VAT payable P 480,000 120,000 P 360,000 ... 15,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 47 Chapter 9: BUSINESS TAXES Input VAT (P84,000 /9. 3333) P 9, 000 Note: The sales is multiplied by 12%... 12% VAT Multiplied by VAT rate Output VAT P1,000,000 120,000 P1,120,000 10% P 134,400 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 48 Chapter 9: BUSINESS TAXES. . .BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 45 Chapter 9: BUSINESS TAXES Net VAT payable P 37,600 Problem – A VAT payable (P1,600,000 x 12%) P 192 ,000