ABC Corporation registered before the Philippine Economic Zone Authority (PEZA) to avail of the tax incentives in
Question:
ABC Corporation registered before the Philippine Economic Zone Authority (PEZA) to avail of the tax incentives in 2015. Its stated Start of Commercial Operations is January 1, 2016. ABC Corporation is registered as a Pioneer firm, which based on the Special Economic Zone Act, is entitled to six (6) years of income tax holiday and a perpetual enjoyment of the five percent (5%) gross income tax after the expiration of the period to avail of the income tax holiday.
During the table years 2021 and 2022, ABC Corporation had the following amounts reflected in its audited income statement:
2021 | 2022 | |
Sales | P12,000,000 | P14,500,000 |
Less: Cost of goods sold | (7,800,000) | (9,425,000) |
Gross profit | 4,200,000 | P5,075,000 |
Less: Operating expenses | (1,890,000) | (2,283,000) |
Operating income | 2,310,000 | 2,792,000 |
Less: Interest expense | (300,000) | (320,000) |
Earnings before taxes | P2,010,000 | P2,472,000 |
Part of the requirements of the PEZA is the submission of Articles of Incorporation of the corporation if any amendment has been made. ABC Corporation amended its Articles of Incorporation to indicate a secondary purpose, but it has failed to furnish PEZA with its amended Articles of Incorporation. As a result, PEZA imposed a fine against ABC Corporation.
Statement 1: Assuming ABC Corporation is an export enterprise, ABC Corporation can simultaneously avail of special corporate income tax and enhanced deductions.
Statement 2: Assuming ABC Corporation is a critical domestic market enterprise, ABC Corporation may choose between the availment of special corporate income tax or enhanced deduction, but never both simultaneously.
a. Both Statements are not true
b. Only Statement 2 is true
c. Only Statement 1 is true
d. Both Statements are true
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078025778
17th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello