TEAM PRTC NATIONWIDE ONLINE OPEN FIRST PRE-BOARD EXAMINATION

MAY 2021 BATCH

February 21 – 26, 2021

Suggested Solutions

1. MANAGEMENT ADVISORY SERVICES (MAS)

February 21, 2021

Suggested answers/solutions by TRINIDAD

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2. AUDITING (AUD)
February 22, 2021

Suggested answers/solutions by OCAMPO/OCAMPO

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3. TAXATION (TAX)
February 23, 2021

Suggested answers/solutions by GUDANI/NARANJO/SIAPIAN

Question No. 1 – C

Tax is GENERALLY payable in money. In some collection cases, the BIR seizes/levies property to cover the
tax assessed.

Question No. 2 – C

Tax collected in relation to the privilege of exercising a profession or calling.

Question No. 3 – B

Question No. 4 – B

In Stages or Aspects of Taxation, there must be a levy before a tax can be assessed or collected.

Question No. 5 - B

True especially in cases or purposes of regulation, fees or charges can be imposed and collected.

Question No. 6 – C

Because it is an exercise of inequitable taxation

Question No. 7 – A

usually only because there are income payments that are not subject to final tax.

Question No. 8 – C

Best answer is C.
A is wrong. Gain from sale of personal property by an NRC derived from sources outside the Philippines is
exempt.
B is wrong. Proceeds from life insurance is an exclusion from gross income hence exempted.
C is correct because the gains are in the nature of an ORDINARY or ACTIVE income.
D is also correct, but income is subject to final tax.

Question No. 9 – A

Express provision of Tax Code.

Question No. 10 – B

Based on Constitutional provision.

Question No. 11 – B

Because one of the attributes of taxation is it is generally payable in money.

Question No. 12 – A

Both are inherent.

Question No. 13 – D

Both are based on limitation of Constitution.

Question No. 14 – A

2nd statement is False. Notice of audit (eLetter of Authority and Tax Verification Notices) are mandatory
for an assessment to be valid.

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Question No. 15 – A

Statement 1 is based on power to allocate income and expense. Statement 2 is FALSE because the same
is due to CONSTITUTIONAL limitation and not INHERENT.

Question No. 16 – C

S1: If no choice is made during 1st quarter or initial return, taxpayer is deemed graduated.
S2: If taxpayer made a choice as to 8%, decision is irrevocable and cannot change and use graduated tax
rate. Hence, Nicanor is wrong if he will propose to change using graduated tax.

Question No. 17 – C

S1: If taxpayer made a choice as to graduated tax, decision is irrevocable and cannot change and use 8%
tax rate. Hence, Nicanor is wrong if he will propose to change using 8% tax.
S2: All income derived from whatever source (Section 32 A 2 of NIRC)

Question No. 18 – C

Question No. 19 – A

Question No. 20 - C

Question No. 21 – D

Use Semi-Monthly Line 4: Php 5,416.67 + [(P40,000-33,333)x30%]= P 7,416.77

Question No. 22 - A

Question No. 23 – A

Question No. 24 – C

1800,000-800,000 = 1,000,000 x30%= 300,000+130,000=430,000

Question No. 25 – C

(SAME BECAUSE TAXPAYER IS DISQUALIFIED TO USE 8% HENCE TAX TO BE COMPUTED USING

GRADUATED TAX TABLE)

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Question No. 26 – C

Dividends from ABC Corp. a domestic corp – Php 100,000

Royalty from books – Php 100,000
Royalty from other brands – Php 100,000
Prize from a TV show – Php 1,000,000
Lotto winnings – Php 10,000,000
TOTAL – PHP 11,300,000

Question No. 27 – B

Lotto winnings – Php 10,000

TOTAL – PHP 10,000

Question No. 28 – C

Dividends from ABC Corp. a domestic corp – Php 100,000 x 20% = 20,000
Royalty from books – Php 100,000 x 10% = 10,000
Royalty from other brands – Php 100,000 x 20% = 20,000
Prize from a TV show – Php 1,000,000 x 20% = 200,000
Lotto winnings – Php 10,000,000 x 20% = 2,000,000
TOTAL – PHP 2,250,000

Question No. 29 – C

Dividends from XYZ Corp. a foreign corp (dominant income is abroad) – Php 100,000
Royalty received from abroad – Php 100,000
Prizes from raffle – Php 10,000
TOTAL – PHP 210,000

Question No. 30 – D

Question No. 31 – B

Question No. 32 – B

Dividends 100,000 x 10% = Php 10,000

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Question No. 33 – D

Question No. 34 – B

Section 24 D of the Tax Code

Final tax of 6% based on higher of Gross selling price or current fair market value as determined in
accordance with Section 6(E)

Solution:
Gross selling price = P 5,000,000
FMV per Tax declaration = P 2,000,000
Zonal Value = P 6,000,000
ZV of P 6,000,000 (Highest) x 6% = B. P 360,000

Question No. 35 – D

Gross selling price = P 10,000,000

FMV per Tax declaration = P 6,000,000
Zonal Value = P 9,800,000
ZV of P 10,000,000 (Highest) x 6% = D. P 600,000

Question No. 36 – C

Gross income P 1,500,000

Less: Allowable deductions (Necessary in the trade or business) 120,000
Taxable Income 1,380,000

Question No. 37 – C

Question No. 38 – A

Question No. 39 – C

Total Income received ₱ 260,000.00

Less: Income exempt from tax
Basic SMW ₱175,000.00
Overtime Pay 40,000.00
Night Shift Differential 25,000.00
Total Exempt Income as MWE 240,000.00 #39
Taxable Income- Commission ₱ 20,000.00 #37
Tax Due
On not over P250,000.00 (₱20,000.00 x 0%) ₱ 0.00 #38

Question No. 40 – A

All are within the threshold of Php 90,000

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4. REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS (RFBT)
February 24, 2021

Explanations on selected items by Atty. VILLEGAS/CAPUNO/AGUILAR

Question No. 6 – A

Both acceptance and donation must be in public instrument. Donation is not covered by the Statute of
Frauds wherein written form would suffice for the enforceability of the contract. This form is for validity, not
for enforceability.

Question No. 10 – D

The presumption is disputable. Creditor can prove that the interest is not yet paid. (See 1176 NCC)

Question No. 12 – C

S2 - Any compensation other than per diems may be granted to directors by a majority vote of the
members with voting rights at a regular or special general assembly meeting specifically called for the
purpose.

Question No. 19 – D

Related Right - derived from the work protected by a copyright.

• Rights of performers
• Rights of phonogram producers
• Rights of broadcasting organizations

Right of Authorship is a moral right in Copyright.

Question No. 20 – A

Under the DPA, the processing of personal information shall be allowed, subject to compliance with the
requirements of this Act and other laws allowing disclosure of information to the public and adherence to
the principles of (1) transparency, (2) legitimate purpose, and (3) proportionality (Section 11, DPA)

Question No. 23 – A

Letter A is an Exception under other laws

Question No. 25 – E

Violation of BP 22 prescribes within four (4) years from its date of commission.

The period is counted from the end of the five (5) working days within the which the drawer of the check
may abate the criminal action by paying the amount of the check.

Question No. 29 – A

S1 – Only the accessory is extinguished. S2 – Pledge is a real contract.

Question No. 36 – A

The contract is Voidable. The effect is that it is valid until annulled.

Question No. 37 – Correction/Erratum from the initial Key Answer. The answer should be “Both statements
are FALSE.”

S1 – is False “even if provided in the article of incorporation or by-laws.” S2 – Treasury stocks may be sold
for less than their par or issued value.

Question No. 38 – B

See Section 15 Revised Corporation Code.

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Question No. 50 – C

This is incidental fraud. The remedy under Article 1170 is to ask for damages. The distinction between causal
and incidental fraud should be clearly delineated.

Question No. 51 – D

Under Art. 1385, Rescission shall not take place when the things which are the object of the contract are in
possession of third persons who did not act in bad faith. The problem states that X was the buyer, had no
knowledge of D’s intention. It is suggested that the correct answer here should be D – C cannot ask for the
rescission of the sale. Remedy is to file an action for damages.

Question No. 55 – A

Registered lease is binding against third persons.

Question No. 57 – B

The form under Article 1784 (in writing) is for the validity of the agency.

Question No. 61 – A

The right to associate another person as a sub-partner does not need the consent of the other partners
since the sub-partner is not a partner.

Question No. 64 – B

The confusion evolved since there is a missing word property “rights.” But the enumeration provides for the
property rights under Article 1810 of the NCC and the right to inspect is a right of a partner and not a
property right.

Question No. 74 – C

Unlawful for the partnership to carry on the business is an extrajudicial ground (See 1830 NCC)

Question No. 97 – E

S1 – “imminent” loss. S2 – Contractual liability is “pro rata and subsidiary”

Question No. 99 – C

See Section 157 Revised Corporation Code.

Question No. 100 – C

S1 – OPC is not required to file by-laws, hence, no period. S3 – satisfied by the Incorporation Test (not
control test)

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5. FINANCAL ACCOUNTING AND REPORTING (FAR)
February 25, 2021

Suggested answer/solutions by OCAMPO/OCAMPO

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6. ADVANCED FINANCIAL ACCOUNTING AND REPORTING (AFAR)
February 26, 2021

Suggested answers/solutions by DE LEON/DE LEON

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 Thank you for taking the TEAM PRTC NATIONWIDE ONLINE OPEN FIRST PRE-BOARD
EXAMINATION May 2021 Batch!

SEE YOU IN THE FINAL PRE-BOARD! REGISTRATION WILL OPEN SOON.

Visit www.teamprtc.com.ph and like and follow our Facebook page, Team PRTC, to see important
updates about the CPA Exam!

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