Answered: John reports the following business…

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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1. John reports the following business transactions: Gross sales - P850,000 Sales discounts - 25,000 Cost of sales - 250,000 Operating expenses - 190,000 Interest income on bank deposits- BPI - 10,000 John also earned a total compensation of P410.020, from a part-time employment of which, P105,000 is excluded from taxation. Compute the taxable income of John which is subject to regular income tax: a. P680,000 b. P690,000 c. P705,000 d. P870,000 2. The negligence of AC, driver of a certain bus company, resulted in the death of JP's wife, physical injuries to JP that prevented him from working for a month, and the total wreck of JP's brand new car which he had bought for P400.000. In the action for damages filed by JP against the bus company, the court awarded the following: • P30,000 for JP's injuries consisting mainly in the loss of his right hand; • P45,000 for JP's loss of one month salary: • P25,000 for the death of his wife: • P100,000 moral damages on account of the death of JP's wife; and • P800,000 for the loss of JP's car. How much is excluded from gross income? a Zero b. P155,000 c. P555,000 d. P955,000 3. Z Corporation leased out its commercial space to C. Per agreement, C shall pay a monthly rental of P150,000 payable every 1st day of the month. Upon signing of the agreement, C shall deposit an equivalent of 3-month rental to Z to settle any unpaid obligations of the lessee upon termination of the lease. In addition, C shall also deposit an advance 2-month rental to be applied after the 1st month. The parties signed the agreement on May 1, 2021. Compute the gross income of Z upon signing of the agreement: a. P150,000 b. P450,000 c. P900,000 d. Answer not given

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