BUSINESS & TRANSFER TAXES

Midterm Quiz (VAT)

Name: ________________________________________ Score: _______ / 40 items

Instructions: Choose the BEST answer for each of the following items. Please write the letter of the
correct answer. Strictly no erasure allowed. (2 points each)
1. Royal Mining is a VAT-registered domestic mining entity. One of its products is gold being sold
to Bangko Sentral ng Pilipinas. It filed a claim with the BIR for tax refund on the ground that
under Section 106 of the NIRC, sales of precious metal to Bangko Sentral ng Pilipinas are
considered export sales subject to zero-rated VAT. Is Royal Mining’s claim for refund
meritorious?
a. Yes, sale of precious gold to Bangko Sentral ng Pilipinas are deemed zero-rated transactions.
b. Yes, sale of precious gold to Bangko Sentral ng Pilipinas is deemed an export sale hence, input
thereon may be credited or refunded.
c. No, sale of gold to Bangko Sentral ng Pilipinas is exempt, hence, input VAT is deemed expensed
and cannot be refunded.
d. No, sale of gold to Bangko Sentral ng Pilipinas is vatable hence input VAT is creditable not
refundable.
2. Lily’s Fashion, Inc. is a garment manufacturer located and registered as a Subic Bay Freeport
Enterprise under Republic Act No. 7227 and a non-VAT taxpayer. As such, it is exempt from
payment of all local and national internal revenue taxes. During its operations, it purchased
various supplies and materials necessary in the conduct of its manufacturing business. The
suppliers of these goods shifted to Lily’s Fashion, Inc. the 12% VAT on the purchased items
amounting to P500,000.00. What is the proper remedy of Lily’s Fashion Inc.?
a. Lily’s Fashion Inc., may use the P500,000 as tax credit;
b. Lily’s Fashion Inc., may ask for a refund of the P500,000;
c. Lily’s Fashion Inc., may convert the P500,000 into tax warrants;
d. Lily’s Fashion Inc., may charge it to cost or expense.
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3. 1 statement: America Corporation is a merchandising concern and has one (P1,000,000.00)
million worth of inventories. Brazil Corporation, a real estate company, exchanged its real
properties for shares of stock of America Corporation resulting to acquisition of corporate
control. The one million (1,000,000.00) worth of inventories of America Corporation,
which were transferred to Brazil Corporation by virtue of corporate take-over is not subject
to VAT.
2nd statement: The exchange of real property by Brazil Corporation resulting to corporate
control is subject to VAT.

a. True, true c. False, false

b. True, false d. False, true
4. ERA vat registered Corporation has the following sales during the month (ILLUSTRATION)
Sale to private entities 224,000.00
Sale to export-oriented enterprise 100,000.00
Sale of exempt goods 100,000.00
The following input taxes were passed on by its VAT suppliers during the month:
Input tax on taxable goods 5,000.00
Input tax on zero-rated sales 3,000.00
Input tax on sale of exempt goods 2,000.00
Input tax on depreciable capital good
not attributable to any specific activity 20,000.00
The VAT payable for the month:
a. 1,000 c. 9,000
b. 7,200 d. 16,000
5. During the month of May, XYZ Corporation had domestic sales amounting to P1,680,000 and
export sales amounting to P1,500,000. During the same month, XYZ’s total purchases
directly attributable to domestic sales amounted to P1,120,000 and total purchases directly
attributable to export sales P1,008,000.

For the month of May, XYZ corporation’s VAT payable:

a. (48,000.00) c. 60,000.00
b. 54,000.00 d. 62,000.00
6. X Company is engaged in a hardware business. It uses accrual basis of accounting in its
financial statements. (ILLUSTRATION)
Gross Revenue 3,500,000
Sales Returns 200,000
Increase in Accounts Receivable, VAT inclusive 224,000
Increase in Inventory, net of VAT 150,000
Purchases 1,000,000
Supplies (40% from VAT registered) VAT exclusive 600,000
Services (60% from VAT registered) VAT exclusive 500,000
Other Operating Expenses 200,000
Compute the Output VAT?
a. 420,000
b. 396,000
c. 372,000
d. 360,000
7. Determine the creditable input VAT? (ILLUSTRATION)
a. 120,000 c. 166,800
b. 184,800 d. 108,000
8. Determine the Taxable Income? (ILLUSTRATION)
a. 1,000,000 c. 1,350,000
b. 1,082,800 d. 1,500,000

9. E-Regalo Corporation, a domestic corporation, is a service provider that operates a platform for
paperless gift cards, also known as electronic gift cards. It also runs digital card storefronts
for various merchants in the Philippines.
In the operation of the platform, E-Regalo earns revenues by charging service fees to the
merchants, and not from the issuance of electronic gift cards to individual clients. Whatever
amounts it receives from the buyers of electronic gift cards are held in trust for reimbursement to its
accredited merchants.
What amounts received by E-Regalo are subject to VAT? (ILLUSTRATION)
(A) Only the service fees paid by the merchants are subject to VAT.
(B) Only the amounts representing the value of electronic gift cards are subject
to VAT.
(C) Both are subject to VAT.
(D) Both are VAT-exempt.
10. A, a VAT-registered CPA had the following data for the 1st quarter of 2021 (VAT not included):
a. On Professional services:
Collections P 280,000
Receivables 120,000

b. Amount received from clients as reimbursement for expenses:

Billed to clients by VAT suppliers 30,000
 Billed to A by VAT suppliers with
corresponding VAT official receipt issued
by A to clients 20,000

c. Payment to:
VAT suppliers 60,000
Non-VAT suppliers 20,000

d. Salaries of office personnel 18,000

e. Purchase of office equipment in the 1st month of the quarter (6

years life) 1,200,000

Determine the VAT payable/(overpayment) for the quarter. (ILLUSTRATION)

(A) ₱24,000
(B) ₱19,200
(C) ₱36,000
(D) None of the above
11. Crisamel Corporation is a VAT-registered domestic corporation engaged in the fast-food business.
It owns a warehouse wherein it stores the ingredients for its fast-food recipes. The warehouse
also is the place where the food is prepared before the same is delivered to the restaurants.
In 2022, it decided to outsource the food preparation operations and sold its warehouse. Which sales
are subject to output VAT?
(A) Only the fast-food sales.
(B) Only the sale of the warehouse.
(C) Both A and B.
(D) None of the above.

12. Which of the following is not a characteristic of VAT?

a. Indirect tax
b. Proportional tax, but regressive in effect
c. Consumption or end-user tax
d. None of the above.

13. Statement 1: A person who imports VATable goods, whether or not in the course of trade or
business, is subject to VAT.
Statement 2: If the importer is a non-VAT person, and the importation of VATable goods is not in
the course of trade or business, such person is not required to register for VAT.
(A) Both statements are true.
(B) Statement 1 is true. Statement 2 is false.
(C) Statement 1 is false. Statement 2 is true.
(D) Both statements are false.
14. J. Parada operates 9 passenger jeeps, a limousine service, a car detailing shop, and a store selling car
and jeep parts and accessories. His sales and receipts during the year are shown below:
Receipts, passenger jeeps ₱ 2,500,000
Receipts, limousine service 560,000
Receipts, car detailing shop 1,000,000
Sales, store 400,000
Total ₱ 4,460,000
(A) Mr. Parada is required to VAT-register his VATable businesses.
(B) Mr. Parada is not required to VAT-register his VATable businesses.
(C) Mr. Parada may optionally register his VAT-exempt businesses under the VAT system.
(D) None of the above.
15. Mr. Parada, in the preceding number, is also engaged in the exportation of toy cars with total
export sales during the year of ₱1,700,000.
 (A) Mr. Parada is required to VAT-register his VATable businesses.
(B) Mr. Parada is not required to VAT-register his VATable businesses.
(C) Mr. Parada is required to VAT-register his VAT-exempt businesses.
(D) None of the above.
16. Can Mr. Parada, in number 63, optionally VAT-register any of his VAT-exempt
businesses?
(A) Yes.
(B) No.
(C) It depends.
(D) None of the above.
17. Statement 1: The importation of a cargo vessel destined for domestic or international
transport operations shall be exempt from VAT provided the importation complies
with the requirements on restriction on vessel importation and the mandatory vessel
retirement program of the Maritime Industry Authority (MARINA).
Statement 2: The sale or importation of fresh mushrooms is exempt from VAT.
(A) Only Statement 1 is true.
(B) Only Statement 2 is true.
(C) Both statements are true.
(D) Both statements are false.
18. Statement 1: The sale of services, including lease of property, to persons
engaged in international shipping or international air transport operations is 0-rated,
provided the seller is VAT-registered and such services are exclusively for
international shipping or air transport operations.
Statement 2: Services provided by a motel-restaurant to flight attendants of an
international airline shall be 0-rated.
(A) Only Statement 1 is true.
(B) Only Statement 2 is true.
(C) Both statements are true.
(D) Both statements are false.

19-21) MEGABIRD, Inc. is a VAT-registered breeder which sells white leg horn hens and fighting
cocks from its lone mega-farm in Alfonso, Cavite. White leg horn is a type of chicken bred for
meat production.
During the first quarter of 2022, total sales of fighting cocks amounted to ₱336,000, gross of
VAT, and total sales of white leg horn hens amounted to ₱200,000. MEGABIRD enjoys a gross
margin of 25% on the sale of all its products.
During the same quarter, the farm underwent repairs amounting to ₱67,200, gross of VAT.
Purchase of supplies directly attributable to the sale of fighting cocks amounted to ₱15,680,
gross of VAT.
During the same quarter, MEGABIRD entered into the following transactions affecting the
inventory accounts:

Fighting cock inventory White leg horn inventory

Paid to veterinarian ₱ 382,000 ₱ 45,500
Paid to shareholders as 480,000 45,000
property dividends
Paid to creditors 525,000 56,250
Donation to Alfonso city 128,000 7,000
during fiesta
Total ₱ 1,515,000 ₱153,750

19) Compute the output VAT of MEGABIRD for the 1st quarter of 2022. (ILLUSTRATION)
a. ₱217,800
b. ₱263,250
c. ₱278,400
d. None of the above.
20) Compute the available input tax credits of MEGABIRD for the 1st quarter of 2022. (ILLUSTRATION)
a. ₱8,880
b. ₱7,788
c. ₱7,810
d. None of the above.
21) Compute the VAT payable of MEGABIRD for the 1st quarter of 2022. (ILLUSTRATION)
a. ₱208,920
b. ₱255,462
c. ₱270,590
d. None of the above.

22) A is engaged in two (2) lines of businesses, one is VAT-registered and the other is Non-VAT. His
records show the following (VAT not included):
Sales:
From VAT business P 4,000,000
From Non-VAT business 6,000,000

Purchases of goods from VAT suppliers:

For VAT business 2,000,000
For Non-VAT business 3,000,000
For both businesses 20,000

Operating expenses 1,800,000

The VAT payable is

a. P 600,000
b. P 240,000
c. P 237,600
d. P 239,040

23) Quarterly VAT return shall be filed on or before the

a. The 10th day from the end of each quarter
b. The 20th day from the end of each quarter
c. The 15th day from the end of each quarter
d. The 25th day from the end of each quarter

24) An individual taxpayer operates a Grocery Store and is not VAT-registered. His annual gross sales
amounted to P2,900,000 for the year although his operations resulted to a net loss for the year 2018.
He is subject to
a. 3% OPT
b. VAT
c. MCIT – 2%
d. None, because operation resulted in a loss.

25) If he was qualified and chose to be taxed under the 8% income tax rate, he shall be subject to:
a. 3% OPT
b. VAT
c. MCIT – 2%
d. None of the above.

26) Which of the following lessors of residential units is/are subject to VAT?
A B C D
No. of apartment units 100 20 16 18
Monthly rent/unit P14,800 P15,000 P15,400 P15,100
 a. B and D
b. C and D
c. B, C and D
d. D only

27) “A” imported an article from the US. The invoice value of the imported article was $7,000 ($1 –
P50). The following were incurred in relation with the importation (net of VAT):
Insurance P15,000
Freight 10,000
Postage 5,000
Wharfage 7,000
Arrastre charges 8,000
Brokerage fee 25,000
Facilitation fee 3,000
The imported article is subject to P50,000 customs duty and P30,000 excise tax. “A” spent P5,600
(inclusive of vat) for trucking from the customs warehouse to its warehouse in Quezon City. The VAT on
importation is: (ILLUSTRATION)
a. P 60,600
b. P 35,000
c. P 50,500
d. P 60,000

28) Assuming that the imported article above was sold for P600,000, VAT exclusive, the VAT payable is
a. P 11,400
b. P 12,000
c. P 9,500
d. P 9,200

29) The A Bakers sells cakes and pastry to well known hotels in the Metro Manila area. The hotels are
allowed credit based on the track record of the hotels. The sale by the store in April 2018 was
P224,000 including the VAT. 75% of the sales are normally on account. How much is the output tax
for the month of April 2018?
a. P 22,000
b. P 20,000
c. P 16,500
d. P 24,000

30) “A”, trader, made the following sales of goods during the month of June 2018, exclusive of VAT:
Cash Sales P 200,000
Open Account Sales 100,000
Installment Sales 100,000
Note: Receipt from installment sales 40,000
Consignment made (net of vat):
June 15, 2018 100,000
May 15, 2018 100,000
April 15, 2018 100,000
Output tax is (ILLUSTRATION)
a. P 50,000
b. P 34,000
c. P 60,000
d. P 72,000
31) A, VAT-registered, made the following purchases during the month of January 2018
Goods for sale, inclusive of VAT P 224,000
Supplies, exclusive of VAT 20,000
Office air conditioner, total invoice amount 56,000
Home appliances for residence, gross of VAT 17,600
Repair of store, total invoice amount evidenced
by ordinary receipt of the contractor 4,400
Creditable input taxes are
a. P 26,400 c. P 24,000
b. P 29,400 d. P 32,400

32) A taxpayer registered under the VAT system on January 1, 2018. His records during the month
show:
Value of inventory as of Dec. 31, 2017 purchased from VAT registered persons P 50,000
VAT paid on inventory as of Dec. 31, 2017 6,000
Value of inventory as of Dec. 31, 2017, VAT exempt goods 60,000
Sales, net of VAT 140,000
Sales, gross of VAT 45,000
Purchases, net of VAT 70,000

VAT payable is
a. P 11,100
b. P 7,221
c. P 3,100
d. None of the above.

THE END

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