1. How much is the net taxable income using itemized deductions?2. How much is the OSD (assuming taxpayer opted to use OSD)?3. How much is the net taxable income using OSD? Data of an individual taxpayer for the current taxable period:Gross salesP3,200,000Cost of sales1,900,000Sales discounts granted (for timely payments)Discounts granted to senior citizens and PWDSIncidental income (operating)Other income (non-operating)Operating expenses100,00080,000200,000150,000400,000

Itemized deductions:Costs that can be subtracted from gross income by taxpayers to reduce their…

Data of an individual taxpayer for the current taxable period: Gross sales Cost of sales Sales discounts granted (for timely payments) Discounts granted to senior citizens and PWDs Incidental income (operating) Other income (non-operating) Operating expenses P3,200,000 1,900,000 100,000 80,000 200,000 150,000 400,000

Data of an individual taxpayer for the current taxable period: Gross sales Cost of sales Sales discounts granted (for timely payments) Discounts granted to senior citizens and PWDs Incidental income (operating) Other income (non-operating) Operating expenses P3,200,000 1,900,000 100,000 80,000 200,000 150,000 400,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

1. How much is the net taxable income using itemized deductions?

2. How much is the OSD (assuming taxpayer opted to use OSD)?

3. How much is the net taxable income using OSD?

Data of an individual taxpayer for the current taxable period:
Gross sales
P3,200,000
Cost of sales
1,900,000
Sales discounts granted (for timely payments)
Discounts granted to senior citizens and PWDS
Incidental income (operating)
Other income (non-operating)
Operating expenses
100,000
80,000
200,000
150,000
400,000

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Step 1: Explain itemized deductions and OSD

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Step 2: Compute Net Taxable Income using Itemized Deductions

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Step 3: Compute OSD (assuming the taxpayer opted to use OSD)

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Step 4: Compute the net taxable income using OSD

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