Title Applications questions & answers.pdf ✅

Problem One: Net profit of industrial Sole proprietorship for the year 2018 was L.E. 50,000. So , if you learn that result of tax examination showed that the following : 1- Transport expenses of purchases of raw materials include L.E. 700 paid in advance. (Prepaid expense asset not expense). 2- Manufacturing salaries and wages not include L.E. 2,400 salaries for month of December. (Unrecorded expenses) 3- The cost of raw materials inventory at the end of the year was L.E. 5,000 and its market value was L.E. 6,200. The firm currently values inventory on the basis of cost, but the firm appraised these raw materials at 10% below their cost. 4- The cost of raw materials in transit was L.E. 9,000. These raw materials were recorded as purchases but not including in ending inventory . 5- Sales figure includes a sum of L.E. 2,000 the value of goods withdrew by the proprietor for his personal use. These goods were purchased for L.E. 1,500. Required: Make the necessary adjustments to determine taxable net profit for the year 2018.
Answer Net profit according to income statement Add: 1- Advance transport expenses are not allowed according to the accrual basis 2- The valuation difference of the ending raw materials inventory, as the value should be recorded at the cost: 5,000 × 10% = 500 3- Raw materials in transit should be included in the inventory as it is owned by the firm Less: 1- Accrued manufacturing salaries and wages according to the accrual basis 2- Unrealized profit for the goods withdrew by the proprietor for his personal use as this good should be recorded at the cost (2,000 – 1,500) Taxable net profit 700 500 9,000 50,000 10,200 2,400 500 (2,900) 57,300
Problem Two: The net profit of a limited partnership was L.E. 200,000. The tax examination revealed the following information: 1- Raw materials at a cost of L.E. 6,000 was recorded in the purchases journal, but it was not included in the ending inventory, because it was in transit. 2- The firm has been using, in preceding years, full costing method with LIFO, but it switched to variable costing method with FIFO in the current year. The following information about finished goods is available from the cost accounting records of the firm: a- The beginning inventory consisted of 2,000 units at a cost of L.E. 8,000. b- The production was 48,000 units. c- The sales were 44,000 unit d- Total overhead costs: L.E. 144,000 variable costs and L.E. 96,000 fixed costs. Required: Determine the taxable net profit.
Answer 1- The volume of ending inventory: Units Beginning inventory 2,000 Production 48,000 Available for sale 50,000 Sales (44,000) Ending inventory 6,000 2- Determination of cost per unit: Cost per unit Full Cost Method Variable Cost Variable cost Fixed cost Total Production Costs Production volume Cost per unit 144,000 96,000 144,000 240,000 ÷ 48,000 144,000 ÷ 48,000 5 3