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ITEMIZED DEDUCTIONS AND OPTIONAL STANDARD

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ITEMIZED DEDUCTIONS AND OPTIONAL STANDARD
ITEMIZED DEDUCTIONS
AND OPTIONAL
STANDARD DEDUCTIONS

Problem 07. A Married individual with three (3) dependent children has the following business data in the Philippines for the current taxable year 2013.
Gross services fees

1,800,000

Cost of Services Rendered

516,800

Rental Income

216,150

Interest Income on Trade Receivables

34,750

Interest Income on bank times deposits

18,000

Interest Expense on Debts to Banks
Taxes Expense (Including income tax for 2008 of
P26,000)
Losses (Including net gambling losses of P
80,000)

30,500
63,000
152,000

Bad Debts Expense (only 60% of this is written off)

78,000

Depreciation Expense

54,000

Pension Contribution

35,400

Fully Deductible Charitable Contribution
Research and Development Cost (amortized for 5 years) 76,500
142,000

Salaries and Wages of Employees

350,000

Rent Expense
Repairs and Maintenance Expense (15% is undocumented) 163,000

Advertising Expense

51,200
26,800

Determine the taxable net income and income tax due:
a. Using the
Itemized Deductions
b. Adopting the
Optional Standard
Deductions

Itemized Deductions
Gross services fees

1,800,000

Cost of Services Rendered

516,800

Gross Profit

1,283,200

ADD:
Rental Income

216,150

Interest Income on Trade Receivables

34,750

Gross Income

1,534,100

LESS:
Deductible Interest expense
Taxes Expense (Including income tax for
2008 of P26,000)
Losses (Including net gambling losses of P
80,000)
Bad Debts Expense (only 60% of this is written off)

24,560

Interest Expense on Debts to Banks
Interest Income on bank times deposits

30,500
18,000
x 0.33

5,940

Deductible Interest Expense
Losses (Including net gambling losses of P 80,000)

= 24,560
152,000
-80000

63,000
72,000
46,800

Bad Debts Expense (only 60% of this is written off)

= 72,000
78,000 x
0.60
= 46,800

Depreciation Expense

54,000

Pension Contribution

35,400

Fully Deductible Charitable Contribution

76,500

Repairs and Maintenance Expense (15% is undocumented)
51200 x 0.15

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