Solution manual transfer and business taxes by valencia CHAPTER 10 MIXED BUSINESS TRANSACTIONS

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 10: MIXED BUSINESS TRANSACTIONS

CHAPTER 10

MIXED BUSINESS TRANSACTIONS
Problem 10–1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

True
False
True
True
True
False
True
False
False

True

True or False

– 5% only.

– the VAT exemption is applicable only for residential units.
- Transport of passengers by land is not subject to VAT.
– the gross receipts should be more than P1,500,000.

Problem 10–2
1. True
2. False – 5% only.
3. True
4. True
5. True
6. True
7. False – It must be prorated based on sales.
8. True
9. True – not subject to VAT, gross receipts do not exceed P1,500,000.
10. True
Problem 10 – 3
1.

Final VAT withholding is 5% and 2% on purchase of services of the contract price before
VAT.

2.

VAT refund is P10,000.

3.

None. Zero rated transaction.

4.

None. Sale of capital asset is not subject to business tax.

5.

Total business tax is P1,800,000, computed as follows:
OPT on passengers by land (P20,000,000 x 3%)
VAT on passengers by air (P10,000,000 x 12%)
Total business taxes

6.

P2,100,000
OPT (P10,000,000 x 3%)
Add: VAT (P10,000,000 x 12%)
Surcharge (P1,200,000 x 50%)
Business taxes including surcharge

P 600,000
1,200,000
P1,800,000
P 300,000
P1,200,000
600,000

1,800,000
P2,100,000


BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 10: MIXED BUSINESS TRANSACTIONS

7.

8.

P432,000
Invoice cost
Custom duty (P2,000,000 x 50%)
Excise tax (P3,000,000 x 20%)
Total landed cost
Multiplied by VAT rate
Input VAT

P2,000,000
1,000,000
600,000
P3,600,000
12%
P 432,000

P2,100,000
Output VAT (P1,000,000 x 12%)
Less: Amortized input VAT (P432,000/60)
VAT payable

P120,000
7,200
P112,800

Note: Assume for the month VAT payable
9.

P600,000
Output VAT (P5,000,000 x 12%) year of sale
(Downpayment is more than 25% considered as cash sales)

P600,000

10. P120,000
Required output VAT (P6,000,000 x 12%)
Less: Output VAT collected year of sale
Additional output VAT

P720,000
600,000
P120,000

11. P80,000
Unsold inventory at cost

Multiplied by
Output VAT
Less: Input VAT
VAT payable

P 500,000
12%
P
60,000
40,000
P
20,000

Note: Asset at retirement is taxed at lower of cost or market.
12. P360,000
VAT payable (P3,000,000 x 12%)
13. P184,000
Output VAT (P1,600,000 x 12%)
Less: Input VAT – Presumptive input VAT
Total manufacturing cost (P300,000/60%)
Less: Conversion cost
Direct material used – fish
Multiplied by presumptive input VAT
VAT payable
14. P184,000
Output VAT (P1,000,000 x 40%) x 2 x 12%
Less: Input VAT – Transitional input VAT (P1,000,000 x 2%)
VAT payable
15. P192,000
Business tax – VAT (P1,600,000 x 12%)

P 360,000
P192,000
P500,000
300,000
P200,000
4%

8,000
P184,000
P96,000
20,000
P76,000
P192,000

VAT taxable because these are commercial units and yearly gross receipts exceeds P1.5M.


BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 10: MIXED BUSINESS TRANSACTIONS

16. P192,000
Output VAT (P1,600,000 x 12%)
17. P3,840,000
Output VAT (P10,000,000 x 3 months) x 12%
Less: Input VAT (P1,120,000/9.3333)

VAT payable

Problem 10 – 4

C

Problem 10 – 5

B

P192,000
P3,600,000
120,000
P3,840,000

Output VAT (P1,125,000 x 12%)
Less: Input VAT – prorated [P80,000 x (P1,125,000+ P300,000)/P1,500,000]
Net VAT payable

P135,000
76,000
P 59,000

Output VAT (P600,000 x 12%)
Less: Creditable Input VAT (P330,000/9.3333) x (P600,000/P900,000)
Net VAT payable

P72,000
23,572
P48,428

Notes:
1. The printing of books is VAT-exempt under Sec. 109y of NIRC.
2. The printing of other forms is subject to VAT and, correspondingly, should be allowed with
Input VAT. The expected amount of gross receipts for taxable transaction is P600,000 x 4 =
P2,400,000.
3. If the Input VAT is not directly identifiable with the portion of sale that is allowed to
creditable Input VAT, then it is allocated based on the total sales.
Problem 10 – 6
B
Amount inclusive of VAT and net of income tax withheld
Divided by
VAT taxable receipt

P26,250
1.07%
P24,532

Output VAT (P25,000 x 12%)

P 3,000

Problem 10 – 7

C

Gross receipts – professional fees
Add: Value-added tax (P1,000,000 x 12%)
Total
Less: Withholding income tax (P1,000,000 x 15%)

Actual cash received

Problem 10 – 8

A

Problem 10 – 9

C

P1,000,000
120,000
P1,120,000
150,000
P 970,000

Gross billings including VAT (P50,000 x 1.12)
Less: Withholding income tax (P50,000 x 10%)
Actual cash received
Percentage tax - passengers (P2,000,000 x 3%)
Vatable transactions - cargoes (P1,600,000 x 12%)
Total business tax

P 56,000
5,000
P 51,000
P

60,000
192,000

P252,0000

Notes:
Additional amount charged in ordinary bus fare tickets issued by common carrier for
passengers’ excess baggage is subject to VAT. (BIR Ruling 094-99)


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Chapter 10: MIXED BUSINESS TRANSACTIONS

Although there is actual Input VAT paid, this could not be claimed as tax credit because the
business is non-VAT registered.
Problem 10 – 10
C
Common carrier’s tax (P1,400,000 x 3%)
Output VAT (P600,000 x 12%)
Total business tax
Less: Creditable Input VAT (P560,000/9.3333) x P600,000/P2,000,000
Net business tax payable

P 42,000
72,000
P114,0000
18,000
P 96,000

Notes:
Additional amount charged in ordinary bus fare tickets issued by common carrier for
passengers’ excess baggage is subject to VAT. (BIR Ruling 094-99)
The creditable Input VAT is prorated between the Vatable and VAT-exempt gross receipts.
Problem 10 – 11
B
Output VAT (P2,000,000 x 3 months x 12%)
Less: Input VAT (P560,000/9.333)
VAT payable

P720,000
60,000
P660,000

Problem 10 – 12
B
Output VAT of Y (P500,000 x 12%)
Less: Input VAT paid to Z (P448,000/9.3333)
VAT payable

P60,000
48,000
P12,000

Problem 10 – 13
C
Total domestic cash sales (P110,000 + P55,000)
Multiplied by VAT rate
Total Output VAT

P165,000
12%
P 19,800

Problem 10 – 14
1.

Output VAT on domestic sales (P2,000,000 x 12%)
Output VAT on sale to government units (P125,000 x 12%)
Amount of output VAT

P 240,000
15,000
P 255,000

Note: Export sales are zero-rated but allowed of Input VAT.
2.

Input VAT from importation (P1,008,000/9.3333)
Input VAT from domestic purchases (P560,000/9.3333)
Total Input VAT

P108,000
60,000
P168,000

3.

Input VAT – domestic sales (P168,000 x P2,375,000/P2,500,000)
Standard input VAT – government sales (P125,000 x 7%)

Total creditable input VAT

P159,600
8,750
P168,350

Note: The P840 actual input VAT on sales to government cannot be
claimed as creditable input VAT, but the standard input VAT which is
7% of the sales to the government.
4.

Total output VAT
Less: Total creditable input VAT
Final withholding VAT – government (P125,000 x 5%)
Net VAT payable

P255,000
P168,350
6,250

174,600
P 80,400


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Chapter 10: MIXED BUSINESS TRANSACTIONS

Problem 10 – 15
1
.

Input tax on taxable goods
Input tax on zero-rated sales
Standard input tax – government sales (P100,000 x 5%)
Input tax on depreciable capital goods
not attributable to any specific activity
(monthly amortization for 60 months)
P200,000/P400,000)
Creditable input tax for the month

P 5,000
3,000
5,000
=

2.

Standard input VAT (P100,000 x 5%)

3.

Zero, because VAT exempt sales are not entitled to Input VAT.

(P20,000

x

P23,000
P5,000

Problem 10 – 16
1
.

Net VAT payable = final VAT (P1,000,000 x 12%)

2
.

None, because the VAT paid is final.

10,000

P120,000

Problem 10 – 17

Output VAT (P150,000 + P30,000) x 12%
Less: Input VAT (P134,400/9.3333)
Net VAT payable

P 21,600
14,400
P 7,200

Assume that the business is VAT-registered.

Note: It is implied that the total collection of the real estate lessor on residential units would be
more than P1,500,000 per year. (P150,000 x 12) = P1,800,000.
Problem 10 – 18
Gross receipts
Currency adjustment factor
Documentation charges
Processing charges
Third party service provider:
Freight charges
Carrier security charges
Trucking fee
Advance manifest surcharge
Actual commission income
2
.

P400,000
P 6,000
10,000
8,000
250,000
50,000
30,000
16,000

370,000
P 30,000

Outbound movement
Local origin charges:

Currency adjustment factor
Documentation charges
Processing charges
Actual commission income

P 6,000
10,000
8,000
30,000


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Chapter 10: MIXED BUSINESS TRANSACTIONS

Inbound movement
Local destination charges:
Trucking fee
Advance manifest surcharge
Total taxable based
Multiplied by VAT rate
Output VAT

30,000
16,000
P100,000
12%

P 12,000

Problem 10 – 19

Percentage tax (P10,000,000 x 3%)
VAT (P10,000,000 x 12%)
Surcharge (P1,200,000 x 50%)
Total business tax liability

P 300,000
1,200,000
600,000
P2,100,000

Problem 10 – 20
1.

Gross receipts of the contractor (P1,116,000/93%)

P1,200,000

Note: The 93% is computed by deducting the 5% final VAT
and 2% withholding income tax from 100%.
2.

Final VAT withheld (P1,200,000 x 5%)

P 60,000

3.

Income tax withheld (P1,200,000 x 2%)

P 24,000

Problem 10 – 21
Output VAT from:
Cash sales to VAT persons (P300,000 x 12%)
Cash sales to Non-VAT persons (P100,000 x 12%)
Cash sales to government units (P200,000 x 12%)
Credit sales to VAT persons (P400,000 x 12%)
Sales return (P10,000 x 12%)
Less: Input VAT from:
Purchases from VAT person per invoice (P324,800/9.3333)
Payment of services for business purposes, gross of VAT
(P72,800/9.3333)
Standard input VAT – government (P200,000 x 7%)
VAT payable
Less: Final withholding VAT – government (P200,000 x 5%)
Net VAT payable

P 36,000
12,000
24,000
48,000
( 1,200)

P118,800

P 34,800

7,800
14,000

56,600
P 62,200
10,000
P 52,200

Notes:
1. The sales discount is generally a cash discount that depends on the happening of
future events which is the prompt payment of customers. This sales discount is not
allowed to be deducted for VAT purposes. (Sec. 4.106-9, R.R. 14-2005)
2. The 5% final withholding VAT is deductible from output VAT on sales to the
government.