Cairo University Final Exam Date: 20/5/2023

Second Semester 2022/ 2023

(Model 1)
Faculty of Commerce Fourth Year - Financial Accounting Major Time: 9-10:30 am
English Section Tax Accounting (2) - ACT 406 No. of Pages: 4 pages

Answer the following 30 questions:

Question (1): FCES Company is a resident legal person in Egypt. During year 2021, FCES
performed the following transactions: Choose the best answer to illustrate the effect of each
of the following transactions on determining the tax base of FCES for the year ended Dec.
31, 2021 in accordance to provisions of income tax law no. 91/2005:

1. An Egyptian corporation (private sector Company) included within its expenses L.E. 500,000
debit interests paid on loans of L.E. 5 million owed by the company. Noting that its capital was
L.E 1,000,000 and the retained profits & reserves from previous years were L.E 300,000. and its
retained profits from the current year for the following year L.E 95,000, in addition to legal
reserve is L.E. 90,000.
A. 557,000 B. (57,000) C. (557,000) D. No adjustment

2. The financing expenses included L.E 640,000 debit interest paid for long-term loan obtained by
the company in the middle of the previous year from Egyptian banks at an interest rate of 17.5%
annually and exploits the loan in the company's activity. Noting that the income statement did
not include L.E 100,000 Exempted credit interest.
Items 01/01/2021 31/12/2021
The balance of equity 2,000,000 3,000,000
The balance of long-term loans 4,000,000 3,000,000
The adjusted rate for credit and discount of Central Bank of Egypt 8% 9%

A. 180,000 B. 46,000 C. 3,500,000 D. 27,500

3. The financing expenses in the income statement included L.E 450,000 debit interest on the loan
which was obtained during the year by the company from a bank at an interest rate of 15%.
Noting that the discount rate declared by the Central Bank at the beginning of the year of 6%.
A. 360,000 B. 90,000 C. 750,000 D. No adjustment

4. The company recorded within its expenses an amount of L.E 8,000 deducted tax on a
commission paid to a broker concerning one of the transactions carried out by the company in
Egypt.
Model (1) Page 1 of 4
 A. No adjustment B. (8,000) C. 8,000 D. None of these
5. The company recorded within its expenses L.E 35,000 customs on imported machinery and
equipment used by the company in its activity.
A. 35,000 B. (35,000) C. No adjustment D. None of these
6. The company recorded L.E 12,000 annual premium on the company's assets, the insurance policy
shall enter into force on April 1st, 2021.
A. 9,000 B. 3,000 C. 12,000 D. (12,000)
7. The company recorded L.E 8,000 as insurance premiums on the company’s inventory against
damage, as well as L.E 5,000 as an auction deposit.
A. 13,000 B. 8,000 C. 5,000 D. 3,000
8. The company didn’t record L.E 20,000 as legal reserve, as well as L.E 17,000 as tax provision.
A. (20,000) B. (17,000) C. (37,000) D. No adjustment
9. The company recorded L.E 4,000 as leased property depreciation expense, as well as L.E 400 as
paid property tax.
A. 4,400 B. (4,400) C. 400 D. (400)
10. The company leases part of the property to others for a monthly received rent of L.E 400, that
was not included as income in the income statement.
A. 400 B. (400) C. (4,800) D. 4,800
11. The company recorded L.E 64,000 within income statement as a bad debt because of the death
of one of the debtors whose debt amount was shown in the company’s records at L.E 100,000,
while the legacy of the debtor is enough only to pay 36% of this debt, the company has filed a
lawsuit to the heirs of the debtor to claim the debt and got a trial judgment to collect these
amounts which was issued 15 months after the death of the debtor, noting that the due date of
this debt was 5 months before the death of the debtor.
A. 64,000 B. 36,000 C. 28,000 D. No adjustment
12. The company recorded L.E 1,500 as bad debt because of the bankruptcy of one of the debtors
after 16 months of the debt due date and his disability to pay the full amount, a lawsuit filed by
the company to claim the amount but still no judgment yet.
A. (1,500) B. 1,500 C. No adjustment D. None of these
13. Miscellaneous income included recovered bad debts by L.E 30,000, and it was clear that the tax
authority approved only L.E 17,000 of this debt amount.
A. (13,000) B. 13,000 C. (17,000) D. 17,000
14. The company recorded within its expenses L.E 50,000 annual salary of partner Ahmed (general
partner), and L.E 24,000 annual salary of partner Hisham (limited partner).
A. 24,000 B. 74,000 C. 50,000 D. 47,000
15. The company recorded within its expenses L.E 10,000 loans to employees.

Model (1) Page 2 of 4

 A. 10,000 B. (10,000) C. No adjustment D. None of these
16. The company recorded within its expenses L.E 5,000 salaries of engineers assigned to install a
new machine.
A. (5,000) B. 5,000 C. No adjustment D. None of these
17. The company recorded within its expenses L.E 5,000 employees’ share in social insurance.
A. No adjustment B. 1,000 C. (5,000) D. 5,000
18. The company recorded within its expenses L.E 4,000 as the share of the company in social
insurance in favor of its active and silent partners.
A. 4,000 B. (4,000) C. No adjustment D. None of these
19. The company recorded within its expenses an amount of L.E 65,000 as withholdings to special
pension funds, noting that this fund has its own regulations and that the funds are separated
from the company's funds and are invested by its own account. Total annual salaries and wages
included in the company’s expenses are L.E 300,000.
A. 65,000 B. 5,000 C. 35,000 D. 30,000
20. On 1/1/2021 the company purchased a building for L.E 150,000. On 31/8/2021 the company
renewed this building for L.E 60,000. The recorded depreciation of buildings was L.E 10,000.
A. 500 B. (500) C. 11,000 D. 1,500
21. On 1/10/2021 the company established a new warehouse for L.E 100,000. The company didn’t
record any depreciation for it.
A. (5,000) B. (3,750) C. (1,250) D. No adjustment
22. On 1/5/2019 the company purchased a building for L.E 90,000. On 30/4/2021 the company sold
this building for L.E 100,000. The removal cost paid by the company for the building leftover was
L.E 5,000, the company recorded L.E 2,000 as depreciation, as well as L.E 4,000 as capital gain for
the sold building.
A. 10,000 B. 9,000 C. 14,000 D. 10,500
23. The beginning balance for computers was L.E 140,000. On 1/3/2021 purchased a new computer
for L.E 20,000. On 1/8/2021 sold a computer for L.E 10,000. The recorded depreciation of
computers was L.E 50,000.
A. (75,000) B. (25,000) C. (10,000) D. 10,000
24. The company recorded in its income statement L.E 150,000 received rent from leasing one of its
buildings to another company, the amount included L.E 30,000 rent deposit.
A. (30,000) B. (150,000) C. 30,000 D. (120,000)
25. The beginning balance of machinery and equipment was L.E 120,000. On 1/3/2021 purchased a
new machine for L.E 50,000. On 15/5/2021 purchased another used machine for L.E 30,000. The
new and used machines will be used in production during the year. On 1/8/2021 sold a machine
for L.E 140,000. Recorded depreciation for machinery and equipment was of L.E 20,000.

Model (1) Page 3 of 4

 A. (40,000) B. (13,000) C. 20,000 D. (33,000)
26. The company didn't record the following within its expenses: L.E 5,800 annual life insurance
premiums for the limited partner and L.E 8,400 annual health insurance premiums for the general
partner.
A. (5,800) B. (8,400) C. (3,000) D. (14,200)
27. Unrecorded gains, as the company negotiated with a certain bank to decrease the amount of
loan previously obtained by the company from L.E 10,000 to L.E 9,400. The company paid the
owed amount.
A. 600 B. (600) C. 9,400 D. (9,400)
28. The company recorded the following as revenues: L.E 10,000 as sold production remnants,
L.E 10,000 as one of the owners' cash withdrawals and a sales agreement amounting to L.E
40,000.
A. (60,000) B. (50,000) C. (40,000) D. (20,000)
29. A legal person revaluates its assets and liabilities due to a merge with another legal person,
unrecorded revaluation gains were amounting to L.E 600,000. As these assets and liabilities
are recorded by their book value at the time of merger.
A. 600,000 B. (600,000) C. No adjustment D. None of these
30. The company has included within its expenses L.E 74,000 as donations and subsidies which
included the following: L.E 17,000 donation to Nasser Social Bank, L.E 5000 donations the
company promised to pay over the next year as a contribution to a charity event will be
hosted by one of the Egyptian registered charity institutions, L.E 22,000 donations to an
Egyptian political party as a contribution in its election campaign, and L.E 30,000 donations
paid to an Egyptian registered charity institution.
A. 17,000 B. 57,000 C. 34,000 D. 52,000

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