EGCC ACC112 ASSIGNMENT, INCLUSIONS FROM GROSS INCOME
LATEST UPDATED QUESTIONS AND CORRECT AND VERIFIED
ANSWERS
INSTRUCTIONS: Read each item carefully and choose the letter of the correct answer.
COMPENSATION INCOME, PENSION AND RETIREMENT BENEFIT
1. Compensation income is earned when an employer-employee relationship exists. Which of the following
income represents income earned through employee-employer relationship?
I. Professional fees
II. Wages
III. Pension pay
IV. Capital gain
A. I only C. II and III only
B. I and III only D. All of the above
2. Which of the following compensation will be subject to graduated rates?
A. Basic salary whether or not the employee is a minimum wage earner.
B. Basic salary only if the employee is not a minimum wage earner.
C. 13th month pay and other benefits not exceeding P90,000.
D. Fringe benefits received by supervisory or managerial employee.
3. Which of the following does not represent compensation income?
I. Honorarium as a guest speaker
II. Emergency leave pay
III. Vacation and sick leave pay
IV. Tips or gratuities accounted for by the employee to the employer
A. I only C. I and IV only
B. IV only D. None of the above
4. Tips or gratuities paid directly to an employee by a customer of the employer which are not accounted for by
the employee to the employer are
Statement 1: Considered passive income
Statement 2: Considered income subject to schedular rate
Statement 3: Subject to creditable withholding tax
A. True, True, True C. False, False, False
B. True, False, True D. False, True, False
5. Pedro is one of the board directors of ABC Company. During the current taxable year, Pedro received director’s
fees amounting to P300,000 from quarterly board meetings he attended. Such fees should A. Form part of
Pedro’s gross compensation income, whether or not he is at the same time an employee of the corporation.
B. Form part of Pedro’s gross compensation income only if he is at the same time an employee of the
corporation.
C. Both A and B
D. Neither A nor B
6. Which among the following is part of the taxable compensation income of an employee? I. Insurance premium
provided by employer on the life insurance policy of the employee where the designated beneficiary is the
relative of the employee.
II. Insurance premium paid by employer on the life insurance policy of the employee where the designated
beneficiary is the employer.
III. The income tax of the employee paid by the employer as part of the employee benefit. IV. The income
tax of the employee advanced by the employer, deductible against the future income of the employee.
A. I only C. II and III only
B. I and III only D. III only
7. One of the following compensation income of an individual taxpayer is not an exclusion from gross income:
A. Monetized vacation leaves not exceeding 10 days a year.
B. Separation pay of an employee who resigned from his employment.
C. Retirement benefits of an employee who has worked for an employer for at least 10 years, who at the time
of retirement is not less than 50 years of age, and who avails of the retirement for the first time. D. All of
these.
, 8. Which of the following is taxable?
A. Separation pay received by a 50-year old employee due to the retrenchment of program of the employer.
B. Retirement pay received from a benefit plan registered with the BIR where at the time the employee
retired, he was 57 years of age, retiring from employment for the first time in his life, and was employed
with the employer for 8 years.
C. Social security benefit received by a balikbayan from employer abroad at age of 30.
D. None of the above
9. The taxpayer was retired by his employer in 2022 and paid P2,000,000 as a retirement gratuity without any
deduction for withholding tax. The corporation became bankrupt in 2024. Can the BIR subject the P2,000,000
retirement gratuity to income tax in 2024?
1st Answer: Yes, if the retirement gratuity was paid based on a reasonable pension where the taxpayer was
50 years old and has served the corporation.
2nd Answer: No, if the taxpayer was forced by the corporation to retire.
A. 1st and 2nd answers are correct.
B. 1st answer is correct but 2nd answer is wrong.
C. 1st answer is wrong but 2nd answer is correct.
D. 1st and 2nd answers are wrong
ANNUITIES
10. This refers to a specified income payable at stated intervals for a fixed or a contingent period, often for the
recipient’s life, in consideration of a stipulated premium paid either in prior installment payments or in a
single payment.
A. Annuity C. Pension
B. Royalty D. Gratuity
11. Annuity payments received by a taxpayer represent a part which is taxable and not taxable. Which of the
following statement is correct?
A. If annuity received represents interest, it is a taxable income.
B. If annuity received represents return of premium, it is not a taxable income.
C. Both statements are correct .
D. Both statements are not correct.
12. Pedro purchased a life annuity for P1,000,000 which will pay him P120,000 annually. The life expectancy of
Pedro is 25 years. Which of the following will Pedro be able to exclude from his gross income? A. The
annual receipt of P120,000.
B. P40,000 a year (computed by dividing P1,000,000 by 25 years)
C. The acquisition cost of P1,000,000
D. None of the above
BAD DEBT RECOVERY AND TAX REFUNDS
13. The following data on net income, bad debt, write-off and recovery show:
2023 Case A Case B Case C Net income (loss) before write-off P120,000 P60,000 P(40,000)
Less: Bad debt written-off 40,000 40,000 50,000 claimed as deduction
Net income (loss) after write-offP80,000 P20,000 P(90,000)
2024
Subsequent recovery P40,000 P10,000 P50,000
The taxable recovery in 2024 should be:
Case A Case B Case C
A. P40,000 P20,000 P50,000
B. P40,000 P20,000 P0
C. P40,000 P10,000 P0
D. P40,000 P0 P0
LATEST UPDATED QUESTIONS AND CORRECT AND VERIFIED
ANSWERS
INSTRUCTIONS: Read each item carefully and choose the letter of the correct answer.
COMPENSATION INCOME, PENSION AND RETIREMENT BENEFIT
1. Compensation income is earned when an employer-employee relationship exists. Which of the following
income represents income earned through employee-employer relationship?
I. Professional fees
II. Wages
III. Pension pay
IV. Capital gain
A. I only C. II and III only
B. I and III only D. All of the above
2. Which of the following compensation will be subject to graduated rates?
A. Basic salary whether or not the employee is a minimum wage earner.
B. Basic salary only if the employee is not a minimum wage earner.
C. 13th month pay and other benefits not exceeding P90,000.
D. Fringe benefits received by supervisory or managerial employee.
3. Which of the following does not represent compensation income?
I. Honorarium as a guest speaker
II. Emergency leave pay
III. Vacation and sick leave pay
IV. Tips or gratuities accounted for by the employee to the employer
A. I only C. I and IV only
B. IV only D. None of the above
4. Tips or gratuities paid directly to an employee by a customer of the employer which are not accounted for by
the employee to the employer are
Statement 1: Considered passive income
Statement 2: Considered income subject to schedular rate
Statement 3: Subject to creditable withholding tax
A. True, True, True C. False, False, False
B. True, False, True D. False, True, False
5. Pedro is one of the board directors of ABC Company. During the current taxable year, Pedro received director’s
fees amounting to P300,000 from quarterly board meetings he attended. Such fees should A. Form part of
Pedro’s gross compensation income, whether or not he is at the same time an employee of the corporation.
B. Form part of Pedro’s gross compensation income only if he is at the same time an employee of the
corporation.
C. Both A and B
D. Neither A nor B
6. Which among the following is part of the taxable compensation income of an employee? I. Insurance premium
provided by employer on the life insurance policy of the employee where the designated beneficiary is the
relative of the employee.
II. Insurance premium paid by employer on the life insurance policy of the employee where the designated
beneficiary is the employer.
III. The income tax of the employee paid by the employer as part of the employee benefit. IV. The income
tax of the employee advanced by the employer, deductible against the future income of the employee.
A. I only C. II and III only
B. I and III only D. III only
7. One of the following compensation income of an individual taxpayer is not an exclusion from gross income:
A. Monetized vacation leaves not exceeding 10 days a year.
B. Separation pay of an employee who resigned from his employment.
C. Retirement benefits of an employee who has worked for an employer for at least 10 years, who at the time
of retirement is not less than 50 years of age, and who avails of the retirement for the first time. D. All of
these.
, 8. Which of the following is taxable?
A. Separation pay received by a 50-year old employee due to the retrenchment of program of the employer.
B. Retirement pay received from a benefit plan registered with the BIR where at the time the employee
retired, he was 57 years of age, retiring from employment for the first time in his life, and was employed
with the employer for 8 years.
C. Social security benefit received by a balikbayan from employer abroad at age of 30.
D. None of the above
9. The taxpayer was retired by his employer in 2022 and paid P2,000,000 as a retirement gratuity without any
deduction for withholding tax. The corporation became bankrupt in 2024. Can the BIR subject the P2,000,000
retirement gratuity to income tax in 2024?
1st Answer: Yes, if the retirement gratuity was paid based on a reasonable pension where the taxpayer was
50 years old and has served the corporation.
2nd Answer: No, if the taxpayer was forced by the corporation to retire.
A. 1st and 2nd answers are correct.
B. 1st answer is correct but 2nd answer is wrong.
C. 1st answer is wrong but 2nd answer is correct.
D. 1st and 2nd answers are wrong
ANNUITIES
10. This refers to a specified income payable at stated intervals for a fixed or a contingent period, often for the
recipient’s life, in consideration of a stipulated premium paid either in prior installment payments or in a
single payment.
A. Annuity C. Pension
B. Royalty D. Gratuity
11. Annuity payments received by a taxpayer represent a part which is taxable and not taxable. Which of the
following statement is correct?
A. If annuity received represents interest, it is a taxable income.
B. If annuity received represents return of premium, it is not a taxable income.
C. Both statements are correct .
D. Both statements are not correct.
12. Pedro purchased a life annuity for P1,000,000 which will pay him P120,000 annually. The life expectancy of
Pedro is 25 years. Which of the following will Pedro be able to exclude from his gross income? A. The
annual receipt of P120,000.
B. P40,000 a year (computed by dividing P1,000,000 by 25 years)
C. The acquisition cost of P1,000,000
D. None of the above
BAD DEBT RECOVERY AND TAX REFUNDS
13. The following data on net income, bad debt, write-off and recovery show:
2023 Case A Case B Case C Net income (loss) before write-off P120,000 P60,000 P(40,000)
Less: Bad debt written-off 40,000 40,000 50,000 claimed as deduction
Net income (loss) after write-offP80,000 P20,000 P(90,000)
2024
Subsequent recovery P40,000 P10,000 P50,000
The taxable recovery in 2024 should be:
Case A Case B Case C
A. P40,000 P20,000 P50,000
B. P40,000 P20,000 P0
C. P40,000 P10,000 P0
D. P40,000 P0 P0
