1. Statement 1: The gross income of an employee is computed by removing excluded income from his total compensation. Statement 2: The gross income from business or profession is computed by deducting cost of sales or revenue from total sales or revenue. Statement 3: Business or professional income exempted from income tax shall be included in computing gross income but will be allowed as deduction under the item "allowable deductions". a. All statements are true b. Only statement 1 is true C. Only statements 1 and 2 are true d. Only statement 2 is true e. Only statements 2 and 3 are true

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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1. Statement 1: The gross income of an employee is computed by removing excluded income from his total compensation. Statement 2: The gross income from business or profession is computed by deducting cost of sales or revenue from total sales or revenue. Statement 3: Business or professional income exempted from income tax shall be included in computing gross income but will be allowed as deduction under the item "allowable deductions". a. All statements are true b. Only statement 1 is true C. Only statements 1 and 2 are true d. Only statement 2 is true e. Only statements 2 and 3 are true 2. Case 1: John made a total of P5,000 contributions for SSS, Philhealth, Pag-ibig, and union dues. The P5,000 contributions form part of John's gross compensation. However, in computing her taxable compensation, such amount must be excluded. Case 2: John suddenly got sick and was hospitalized for 1 month. She received a certain amount of benefit from SSS. Her hospital bills were also reduced by her philhealth benefit. The amount received by Nora from SSS and the reduction in her hospital bills constitute taxable compensation to John. a. Both cases are correct b. Both cases are incorrect c. Only case 1 is correct d. Only case 2 is correct 3. Max, a CPA, is a faculty of LUV University under the department of accountancy. She was employed on a contractual basis. Agnes is said to be exercising her profession as CPA in the academe/education sector. The income of Agnes from the school is – a. Business income b. Professional income c. Compensation income d. Both B and C
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