93-09 - Capital Assets

School: San Pedro College of Business Administration - San Pedro, Laguna - Course: ACCOUNTING MISC - Subject: Accounting

CPA REVIEW SCHOOL OF THE PHILIPPINES Manila CAPITAL ASSETSDela Cruz / De Vera/ Llamado 1.Determine whether ordinary asset or capital asset. a.Inventories of raw materials, work in process and finished goods b.Office equipment c.Land used in business d.Land for sale by a real estate dealere.Accounts receivable f.Securities held as investment g.Land held for investment purposes h.Residential house i.Business of sole proprietorship sold to a corporation j.Interest of a partner in a partnership k.Car used partly for business and partly for personal purposes. 2.This is a capital asset a.A residential land previously foreclosed by PNB and is now being offered for sale to the public b.A commercial building foreclosed by a lending institution c.A 10-door apartment unit owned by a retired government employee d.A residential land owned by a practicing CPA 3.An individual taxpayer owns a ten (10)-door apartment with a monthly rental of P10,000 each residential unit. He sold this property to another individual taxpayer. Which is not correct? a.The seller is not liable to pay the capital gains tax. b.The property sold is a capital asset. c.The taxpayer is engaged in business. d.The rental income is subject to income taxin the taxpayer's ITR. 4.Basic rule sale of capital assets, except a.Sale of real property located in the Philippines by a foreign corporation is subject to 6% CGT based on the selling price or FMV, whichever is higher b.Sale of shares of stock of a domestic corporation through the local stock exchange or initial public offering is exempt from income tax. c.Sale, by individual taxpayers and domestic corporations, of shares of stock of a domestic corporation not through the local stock exchange is subject to a final tax of 15%. d.Sale of personal property located in the Philippines by a resident citizen is subject to the rules on holding period. 5.A. Capital losses are deductible from ordinary gains but net capital loss is not deductible from ordinary gains. B.Ordinary losses are deductible only to the extent of the capital gains but the net capital loss is not deductible from ordinary gain. a.True, true b.True, false c.False, true d.False, false 6.A is a 40% partner in ABC, a general professional partnership. The partnership was organized in 2010 with A contributing P 200,000. The partnership had the following net income: 2017-P 120,000 distributed to and received by the partners. 2018-P70,000 not yet distributed to the partners. Answer: (a)to (d)-Ordinary (e) to (j)-Capital (k)-Part Ordinary/PartCapital

2 Tax 93-09In 2018, the partnership was dissolved and A received the sum of P 250,000 upon liquidation. Determine the taxable gain or deductible loss of A.Answer:Gain of ₱11,000 7.B had an original investment in a general professional partnership of P200,000 in 2017. His share in the net income of the partnership for 2017 which was credited to his capital account was ₱30,000.In 2018, P50,000 was credited to his capital account as his share in the partnership income, but he withdrew P10,000 from such share. He paid the income tax on his share in the partnership net income of 2017 and 2018.B retired at the end of 2018 and received P300,000.Determine his capital gain or loss.Answer: B will recognize ₱15,000 gain.