Write True if the statement is correct or False if the statement is incorrect.
1. Fringe benefits are forms of incentives to employees. 2. Fringe benefits include salaries, services, or other benefit given by employer to an individual employee. 3. Wage and/or salary given to the employees may be reduced during financial difficulties. 4. dditional remuneration for overtime and separation pay does not include fringe benefits. !. Fringe benefit ta" includes additional help granted by the employer to the employees in addition to the basic salary. #. The ta" rate of fringe benefits ta" shall be the same $ith corporate ta" rate for income ta"es. %. The fringe benefits received by the ran&'and'file employees are to be reported in the annual income ta" return. (. The fringe benefit ta" is a final ta" to the employer. ). The grossed up monetary value is the benefit e"pense of the employer. 1*. Fringe benefit ta" shall be treated as a final income ta" on the employee that shall be $ithheld and paid by the employer+s gross income. 11. ,f the employer did not $ithhold the F-T and subse.uently discovered and assessed by the -,/, the related fringe benefit ta" is not allo$ed as deduction from the employer+s gross income. 12. The fringe benefit ta" is the income ta" income earned by the employee. 13. The liability of the employer is to $ithhold the corresponding income ta" from the fringe benefit earned by the employee. 14. ,f the fringe benefit is granted in money, or directly paid for by the employer the actual amount received by the employee is the monetary value. 1!. ,f the fair value of the assigned residential house is greater than its cost, the e"cess amount shall be amorti0ed and charged to fringe benefit e"pense. 1#. ll housing fringe benefits are sub1ect to fringe benefit ta". Problem 6-2 True or False Write True if the statement is correct or False if the statement is incorrect. 1. 2alaries of household maid granted by the employer to a managerial employee are ta"able fringe benefits 2. ll household e"penses are ta"able fringe benefits. 3. travel as fringe benefit re.uired by the company to its officer is sub1ect to fringe benefit ta" 4. 3oliday and vacation e"penses of the managerial employee borne by his employer are ta"able fringe benefits. !. ll scholarship grants to the employees are non'ta"able fringe benefits. #. 4ontributions of the employer for the benefit of the employee for retirement, insurance and hospitali0ation benefit plans are sub1ect to fringe benefit ta". %. ll fringe benefits are sub1ect to fringe benefit ta", e"cept those covered by employer benefit rule and de minimis. (. fringe benefit no t sub1ect to F-T is also not sub1ect to compensation income ta". ). Fringe benefit ta" is not applicable $hen the fringe benefit given is re.uired by the nature of or is necessary to the trade, business or profession of the employer, or $hen the fringe benefit is for the convenience of the employer. 1*. The moneti0ed value of leave credits paid to government officials and employees is not sub1ect to F-T and $ithholding ta" on compensation. 11. medical allo$ance of 5%!* per employee per month to the employee+s dependent is a nonta"able fringe benefit. 12. 6aily meal allo$ance not e"ceeding t$enty'five percent of the basic minimum $age is a 7de minimis.8 13. 9oneti0ed unused vacation leave credits of private employees not e"ceeding ten :1*; days during the year and the moneti0ed value of leave credits paid to government officials and employees part of de minimis. Problem 6-3 Multiple Choice 2elect the letter that contains the best ans$er. 1. Which of the follo$ing statements is true< a. ="isting fringe benefit being provided to a managerial employee could be reduced $ithout violating the labor la$ b. The fringe benefit increases in direct proportion to overtime rendered. c. The fringe benefit is strictly payable in cash d. The fringe benefit of managerial employee is e"empted from income ta".
2. Which of the follo$ing statements is not correct< a. Fringe benefit of a managerial employee is sub1ect to final income ta". b. Fringe benefit ta" is a creditable $ithholding ta". c. Fringe benefit ta" is an income ta". d. Fringe benefit ta" rate is 32>. 3. Which of the follo$ing statement is correct< a. The grossed up monetary value of fringe benefit is e.ual to #(> of cash value of the benefit. b. The ta"able compensation of the employee $ith respect to the benefit is e.ual to the grossed up monetary value of the benefit. c. The fringe benefit ta" is the income ta" e"pense of the employer. d. The 32> final ta" is applied to the monetary value of the benefit. 4. Which of the follo$ing is not correct< /elatively small meal allo$ances paid to ran& and file employee intended to promote health and good$ill are a. considered as de minimis fringe benefits b. not sub1ect to fringe benefit ta" c. not sub1ect to income ta" as compensation. d. sub1ect to income ta" as compensation. !. Which of the follo$ing is sub1ect to fringe benefit ta"< a. Fringe benefit re.uired by the nature of or necessary to trade business or profession of the employer. b. Those granted for the convenience of employer. c. 6e minimis benefits. d. 9edical cash allo$ance to dependents of employees amounting to 51!* per month. #. Which of the follo$ing concepts denotes e"emption from fringe benefit ta"< a. 4onvenience of the employer rule b. ?ecessity to the business or trade of employer rule. c. 6e minimis benefits d. ll of the above %. Which of the follo$ing is not a ta"able fringe benefit< a. 51*,*** actual medical benefits received during the ta"able year b. 6aily meal allo$ance of 5!*. The basic minimum $age is 52** c. 4ost of the educational assistance to the employee+s children. d. 4ost of employees+ group insurance paid by the employer. (. Which of the follo$ing fringe benefit is sub1ect to compensation income< 6e minimis /eceived by ran&'and'file /eceived by supervisor a. @es @es @es b. ?o @es @es c. ?o @es ?o d. @es ?o @es ). Which of the statements is correct< 2tatement 1A The fringe benefit ta" is part of the compensation of the managerial employee 2tatement 2A The fringe benefit ta" is to be $ithheld and remitted by the employer to the -,/ a. 2tatement 1 is correct. b. 2tatement 2 is correct c. -oth statements are correct d. -oth statements are incorrect 1*. What is the value of fringe benefit if a property is furnished by the employer to be used by the employee $ithout transfer of o$nership< -oo&Balue Fair mar&et value 6epreciated value a. ?o ?o @es b. @es @es ?o c. @es ?o @es d. ?o @es @es 11. The follo$ing business travel is sub1ect to fringe benefit ta", e"cept a. 3otel accommodation for C3** per day b. 4ost of economy airplane tic&et c. ,nland travel e"pense d. ll of the above 12. =ducational grant to the employee or his dependent by the employer is not sub1ect to fringe benefit ta", e"cept $hen a. the study grant is connected to trade b. there is a $ritten contract that the employee $ill remain to $or& for a period of time c. the assistance $as through competitive scholarship program d. the study grant is not connected to trade Problem 6-4A De Minimis Case 1- De minimis and other beneits 9r. received the follo$ing compensation and benefits during the yearA Total basic salary 524*,*** 13 th month pay 2*,*** /ice subsidy :52*** per month;'de minimis 24,*** 3o$ much is the ta"able and the nonta"able compensation of 9r. < Ta"able ?onta"able a. 524*,*** 53*,*** b. 524*,*** 53(,*** c. 524*,*** 544,*** d. 524#,*** 53(,*** Case 2- M!" #ith other beneits #ithin P3$%$$$ ceilin& 9r. - a minimum $age earner, received the follo$ing compensation and benefits during the yearA Total basic salary 5)#,*** Dvertime pay 52*,*** 13 th month pay 5(,*** 3a0ard pay 52,*** 3oliday pay 51,*** 3o$ much is the ta"able compensation of 9r. -< a. 5132,*** b. 511#,*** c. 5112,*** d. 5 '*' Case 3- M!" #ith other beneits e'ceedin& P3$%$$$ ceilin& 9r. 4, a minimum $age earner , received the follo$ing compensation and benefits during the yearA Total basic salary 51*(,*** Dvertime pay 53*,*** 13 th month pay 5),*** 3a0ard pay 52,*** 3oliday pay 5 1,*** /ice subsidy :53,*** per month;'de minimis 53#,*** 4lothing allo$ance 52*,*** 3o$ much is the ta"able and the nonta"able compensation of 9r. 4< Ta"able ?onta"able a. 51!*,*** 53*,*** b. 51!4,*** 5!2,*** c. 51%#,*** 53*,*** d. 5 '*' 5 2*#,*** Case 4- M!" #ith business income 9r. 6, a minimum $age earner, received the follo$ing compensation and benefits during the yearA Total basic salary 5)#,*** Dvertime pay 2*,*** 13 th month pay (,*** /ice subsidy:52,*** per month;'de minimis 24,*** ,n addition, 9r. 6 earned the follo$ing other incomeA /ent income 5#*,*** ,nterest income, net of final ta" 4,*** 3o$ much is the ta"able and nonta"able income of 9r. 6< Ta"able ?onta"able a. 51%#,*** 532,*** b. 51)4,*** 514,*** c. 51(2,*** 53*,*** d. 51(1,*** 532,*** Problem 6-4( )ousin& and Motor *ehicle (eneits Case 1-)ousin& (eneits E corporation purchased a residential property $ith a 0onal value of 5!,***,***. The property has a fair mar&et value of 5#,***,***. 1. ,f the property $as assigned for the use of E 4o.+s president, ho$ much is the fringe benefit ta"< a. 5%*,!(( c. 54(,*** b. 5!(,(24 d. 54*,*** 2. ,f the property $as ac.uired for the use of E 4o.+s manager for 52,***,*** do$n payment and 51,***,*** on installment basis per year in 4 years :$ith an effective interest rate of 12> per year;, ho$ much is the fringe benefit ta"< a. 5%*,!(( c. 5!(,(24 b. 5!),2#4 d. 53!,2)4 Case 2- Motor *ehicle (eneits 4o. purchased a car for a cash price of 51,***,***. Df the 4o. purchased the car on installment, the monthly payment $ould be 52*,*** for ! years. 1. ,f the company decided to maintain the car for the use of its president and other employees as needed. 3o$ much is the fringe benefit ta"< a. 54%,*!) b. 5!#,4%1 c. 5)4,11( d. 5112,)41 2. ,f the company decided to transfer the o$nership of the car in the name of its president, ho$ much is the fringe benefit ta"< a. 54%,*!) b. 5!#,4%1 c. 5)4,11( d. 5112,)41 Problem 6-+ *alues o Frin&e (eneits and F(T n employer remitted to -,/ 5(*,*** pertaining to amount $ithheld from cash benefit granted to its managerial employee. 1. 3o$ much is the monetary value of fringe benefit paid to managerial employee< a. 533*,*** b. 52!*,*** c. 51%*,*** d. 5(*,*** 2. 3o$ much is the grossed'up monetary value of fringe benefit< a. 533*,*** b. 52!*,*** c. 51%*,*** d. 5(*,*** 3. The income ta" e"pense deductible from the business income of the employer for this particular payment is< a. 5(*,*** b. 5!4,*** c. 52!,#** d. 5'*' Problem 6-6 Deductible Frin&e (eneit "'pense E 4orporation paid 513#,*** cash fringe benefit for year 2** representing (*> of the car incentive for its area manager. E remitted the related final ta" of the said cash fringe benefit. The amount to be claimed as business deduction from business income is a. 52**,*** b. 51%*,*** c. 513#,*** d. 51*(,(** Problem 6-, Deductible Ta' "'penseb =FB partnership $ithheld 51),2** from the fringe benefit granted to its office manager. 5ertaining to the amount ta" $ithheld, ho$ much $ould be the ta" e"pense that the office manager could deduct from his gross compensation income< a. 5'*' b. 5 1,#44 c. 5 1),2** d. 5#*,*** Problem 6-- Frin&e (eneit Ta' Goseph =strada, a company messenger, received the follo$ing fringe benefits during the ta"able periodA 9otor Behicle purchased to deliver messages 5!1,*** ctual medical help for hernia operation 13,#** Food allo$ance per month 1,%** Hniform allo$ance #(* The fringe benefit ta" of Goseph $ould be a. 531,!2* b. 53*,4** c. 524,*** d. 5'*' Problem 6-. Ta' /eco0ered b1 the 2o0ernment ,n 2**-, the -,/ found that E 4orporation+s payments of fringe benefits to its managerial employees in 2** $ere charged to miscellaneous e"pense amounting to 51*2,*** . ,f the company+s 2** net income after ta" $as 51,%!*,*** ho$ much is the ta" recovered by the government for the said discovery if the re.uirement of e"pense deductibility is considered< a. 5(3,%** b. 54(,*** c. 5%(,#** d. 51%,4** Problem 6-1$ )ousin& Pri0ile&e 4orporation assigned its residential building to be used by its 4=D. The building $as purchased for 5 2,*4*,** and has a 0onal value of 5 1,)%2,***. 3o$ much is the monthly fringe benefit by the 4=D a. 512!,*** b. 5 #,2!* c. 5 #,*42 d. 5 2,*** Problem 6-11 )ousin& Pri0ila&e - 4orporation rents a condominium in -aguio 4ity to be used by its &ey officers that supervise the /egion , business operation. The monthly rental e"pense on the condominium is 534,***. Gean, the corporate comptroller, is assigned in -aguio 4ity for t$o months to investigate inventory fraud. 2he $as assigned to stay in the said condominium during the period of investigation. 3o$ much is the amount of fringe benefit ta" on the condominium< a. 5'*' b. 5(,*** c. 51*,((* d. 51#,*** Problem 6-12 "'pense Account Ferry, the chairman of the board, presented the follo$ing e"pense accounts paid by H 4orporationA 9onthly /epresentation llo$ance 53*,#** Frocery ,tems 1%,*** 5ants and T'shirt 3,4** Fasoline of company car #,(** The fringe benefit ta" $ould be a. 52%,2** c. 522,4** b. 524,*** d. 5),#** Problem 6-13 Motor *ehicle Frin&e (eneit 9iss 4larene 2ito, the production supervisor of the Hniversal 4orporation $as given a fringe benefit in the form of a car $hereby the company has shouldered %!> of the price. The price of the car is 54%#,*** 3o$ much is the fringe benefit e"pense< a. 5%**,*** c. 54%#,*** b. 5!2!,*** d. 5 3!%,*** Problem 6-14 )ousehold "'pense ,n 2**-, 9iss /o$ena Forospe, a managerial employee, $as reimbursed by her employer for the total salary she paid to her house helper amounting to 51#,32* for the year and 534,*** traveling e"penses incurred in connection $ith her duty as sales manager 3o$ much $ould be the fringe benefit ta" for the year, to be $ithheld by her employer< a. 524,*** c. 51#,*** b. 523,#(* d. 51(,4)# Problem 6-1+ )ousehold "'pense managerial employee received 5!%,(** cash from his employer. The amount is to repay the manager of the amount paid as salary of the household helper of the manager+s family. 3o$ much is the fringe benefit ta"< a. 5(!,*** c. 52%,2** b. 5!%,(** d. 51(,#4) Problem 6-16 3nterest beneits on 4oan ndoy, an employee of 5 Finance 4o. borro$ed money from the company amounting to 5((,4**. The company+s policy is to charge 3> per annum to its employees instead of its regular interest rate of 1.!> per month. 1. ,f ndoy is a ran&'and'file employee, ho$ much is the fringe benefit ta" on the interest benefits< a. 5#,24* c. 51,24( b. 53,%44 d. 5'*' 2. ,f ndoy is a managerial employee, ho$ much is the fringe benefit ta" on the interest benefits< a. 5#,24* c. 51,24( b. 53,%44 d. 5'*' Problem 6-1, Membership Fees 4orporation paid the follo$ing membership fees of its comptrollerA 5rofessional Ta" /eceipts :5T/; 5 !,44* 5,45 Iifetime membership 13,#** Foma Folf 4lub #(,*** -aguio 4ountry 4lub 34*,*** 3o$ much is the fringe benefit ta"< a. 51#*,*** c. 51)(,4** b. 51)2,*** d. 52**,)#* Problem 6-1- "'penses or Forei&n Tra0el rt, the B5 for 9ar&eting of H 4o. $as given a privilege to attend a business meeting in =urope. 3e incurred the follo$ing e"penses $ith supporting documentary evidencesA 5lane Tic&et'ordinary :round trip; C2,*4* 3otel, room charge for four days 1,#** ,nland travel 1,1)* 5ersonal ="penses 2(* ssume that C1J5!* and all e"penses are in the name of the employee reimbursed by the company. 3o$ much is the amount of fringe benefit e"pense< a. 5!*,*** c. 51!*,*** b. 513%,!** d. 523%,!** Problem 6-1. "'penses or Forei&n Tra0el n employer sent a managerial employee to an international convention. From 5hilippines to country of venue, business class plane tic&et of 54*,(** $as paid by the employer. From country of venue bac& to the 5hilippines, 5!4,4** first class tic&et $as by the employer. 3o$ much is the fringe benefit ta" for the plane tic&ets paid< a. 51),2** c. 5%,#(* b. 52!,#** d. 5#,4** Problem 6-2$ )olida1 and *acation "'penses managerial employee $as given by his employer all paid up vacation e"penses amounting to 54*(,*** plus salary of 534,***. 3o$ much is the fringe benefit e"pense of the employer< a. 5#!*,*** c. 52*(,*** b. 5#**,*** d. 51)2,*** Problem 6-21 "ducational Assistance fter passing the scholarship e"amination, G received 5)2,!** as educational from =FB foundation $herein his father $or&s as the B5 for Dperations. 3o$ much is the fringe benefit ta"< a. 5'*' c. 544,(** b. 53*,4#4 d. 5)!,2** Problem 6-22 "ducational Assistance 1. For the year 2**, 9ichelle Fallego, a dean of college, received from her employer an educational benefit $ith cash value of 5#!,2(*. The fringe benefit ta" is a. 5#!,2(* c. 51!,3#* b. 53*,%2* d. 5'*' 2. 5ertaining to the same data in number 1, the operating e"pense allo$ed as deduction from business income of the employer is a. 5)#,*** c. 53*,%2* b. 5#!,2(* d. 5'*' Problem 6-23 5onta'able and Ta'able Frin&e (eneits 9iss 9abu&ol, as the head of office, received the follo$ing fringe benefits during the ta"able yearA 4ar 5214,*** Hniform #,(** /ice 2ubsidy 12,(** =mployees chievement $ard 1*,*** Iaundry allo$ance 3,#** 9edical allo$ance to dependents (,!** ctual 9edical benefits 1*,*** /e6uiredA 4ompute the follo$ingA 1. ?onta"able fringe benefits. 2. Fringe benefit ta" Problem 6-24 Comprehensi0e Problem Bioleta, a branch manager of 2an 9iguel 4orporation since 2**, received a total annual salary of 53#*,***. 2he also received a free housing benefit $ith monthly rent of 512,24* and fi"ed monthly meal of 52,*** considered as part of her compensation income. ,n 2**-, her salary and, fringe benefits has been increased by 1*>. 6uring the year, in addition to her previous fringe benefits the follo$ing cash benefit $ere e"tended to her by the corporationA a. =ducational assistance for her dependents amounting to 513,#**. b. =mployee achievement a$ards, 51*,*** c. Iions 4lub membership fee, 52*,4** /e6uired7 4ompute the follo$ingA 1. 2**- ta"able amount of fringe benefits sub1ect to F-T 2. 2**- fringe benefit ta" 3. 2**- deductible amount of fringe benefits Problem 6-2+ Comprehensi0e Problem The follo$ing items of fringe benefits are given to 9r. Wong, a manager of Ieslie 4ompanyA 3ousehold personnel 5 #,!** 3ousing 2!,*** Food 3#,*** Transportation 1*,*** =ducational 2*,*** Iife insurance 1!,*** Total 5112,*** /e6uired7 3o$ much is the fringe benefit ta" due assuming that 9r. Wong is a :an;A 1. lien not engaged in trade or business in the 5hilippines 2. Filipino employed as manager of an offshore ban&ing unit of a foreign ban& 3. Filipino employed as manager of 4lar& 2pecial =conomic Kone :42=K; Problem 6-26 Compensation and De minimis 9r. 4, a resident Filipino citi0en, sho$s his income and e"penses during a calendar yearA Fross compensation income 51*),2** 13 th month pay ),1** 222 premium contribution 2,4** 5hilhealth premium contribution 3,*** 6e minimisA /ice 2ubsidy 24,*** ctual 3ospitili0ation payments 1!,*** 4lothing allo$ance !,*** Temporary 3ousing for 3 months #,*** /e6uired7 4ompute the ta"able compensation during the year assuming that 9r. 4 is aA 1. 9inimum $age earner 2. ?ot a minimum $age earner Problem 6-2, Compensation and De minimis 9r. -, a resident Filipino citi0en, sho$s his income and e"penses during a calendar yearA Fross compensation income 512(,*** 13 th month pay 1*,#** 222 premium contribution 2,4** 5hilhealth premium contribution 3,*** 6e minimisA /ice subsidy 1(,*** ctual hospitali0ation payments 2*,*** 4lothing allo$ance 4,*** Food allo$ance for overtime in 1* days 1,!** Temporary housing for 3 months #,*** /ent income #*,*** /e6uired7 4ompute the ta"able compensation during the year assuming that 9r. 4 is a 1. 9inimum $age earner 2. ?ot a minimum $age earner Problem 6-2- *aluation and F(T The follo$ing fringe benefits $ere received by a managerial employee from his employerA a. 4ash amounting to 5#(,*** to purchase a motor vehicle. b. 4ar ac.uired on installment. TermsA 52**,*** do$n payment and 51(*,*** installment for ! years. The effective interest rate is 1(> per year. c. 3ouse and lot costing 5(1#,*** transferred in the name of the employee. The property has a fair mar&et value of 1!*> based on its cost. The estimated life is 2* years d. 3ouse and lot costing 51,*2*,*** $ith a fair mar&et value of 51,#**,***. The property $as not transferred in the name of the employee. The estimated useful life of the property is 2! years e. partment rented by the company for 5244,*** for a year and granted the same to be used by the employee for free f. ssignment of residential property for the use of employee. The property has a fair mar&et value if 51,3#*,*** but its 0onal value is 51,224,*** /e6uired7 4ompute the follo$ing :independent situation;A 1. 9onetary value 2. Fringe benefit ta" Problem 6-2. *aluation o Frin&e (eneits ,n 2**", 9ay Tamboc is a branch manager of 54, -an&. The ban& assigned to her a condominium. ,f the condominium is leased to others it has a monthly rent income of 52!,*** The condominium has the follo$ing valuesA c.uisition 4ost 54,***,*** Fair 9ar&et Balue !,***,*** Konal Balue #,***,*** ,n addition, the ban& purchased a car in the name of 9ay. The car $as ac.uired on installment $ith the follo$ing termsA 53**,*** do$n payment and 524*,*** per year for ! installment. The effective interest rate is 12> per year. /e6uired7 1. 4ompute the fringe benefit ta" of each fringe benefit received 2. 9a&e the appropriate 1ournal entries of each fringe benefit.