Question

Oliver, who owns a construction supply store and sidelines as an engineering consultant, had the following transactions during the year:

Salaries, net of withholding tax of P33,000 and sss/ph/pag-ibig benefits of P11,000                           419,560

Hazard pay given by the employer                                                                                                                       54,650

Various de minimis benefits (within limits)                                                                                                        56,125

Gross Sales of Merchandise                                                                                                                            1,935,600

Disbursements:

Cost of Sales                                                                                                                                                         423,490

Salaries and allowances                                                                                                                                    325,670

Taxes and licenses, including income tax of P14,000                                                                                    135,690

Insurance Expense                                                                                                                                                95,670

Depreciation, including depreciation for household furniture of P7,800                                                60,530

Bad debts written off, including P35,000 receivable from his brother                                                 120,500

Interest expense, including interest on loan from his father of P14,500                                               84,680

Business rentals                                                                                                                                                 105,670

Light, water and telephone                                                                                                                            258,940

Losses, including losses due to fire of P120,000 covered by insurance                                             340,520

Charitable contribution, including to victims of the marawi siege for

    P135,000 and P300,000 to the national museum                                                                                   183,530

Miscellaneous expenses, including medical expense of the household staff              

   For P4,500 and educational expense of a son for P25,000                                                                    87,730

Requirement:

Compute for the net taxable income and regular annual income tax of Oliver.

Answer 1

Particulars	Regular Annual Income	Net Taxable Income
Gross Sales of Merchandise	1,935,600	1,935,600
Cost of Sales	423,490	423,490
Salaries and Allowances	325,670	325,670
Taxes and licenses	135,690	121,690
Insurance expenses	95,670	95,670
Depreciation	60,530	52,730
Bad debts written off	120,500	85,500
Interest expense	84,680	84,680
Business rentals	105,670	105,670
Light, water and telephone	258,940	258,940
Losses	340,520	220,520
Charitable contribution	183,530	183,530
Miscellaneous expenses	87,730	58,230
Net Profit	(287,020)	(80,720)
Salary Income	463,560	463,560
Hazard Pay	54,650	54,650
Various de minimis benefits	56,125	0
Total Income	287,315	437,490

Here, we are assuming that the loan taken from father is not for purpose of business, hence it is not allowable as an expense.

Contributions paid to marawi siege and national museum is allowable as an expense for income tax purposes.