ACC 114 - AUDITING & ASSURANC: SPECIALIZED INDUSTRIES

ANSWERS TO CLASSWORK
EXERCISE 9: Insurance Contract

Problem 1. ( 4 points )
Answer 1: P17,500 (20,000 x 21/24) √ ( 2 points)
Answer2: P2,500 (20,000 x 3/24) √ ( 2 points)

Problem 2. ( 8 points )
Answer 1: P9,375 (P15,000 x 15/24) √ ( 2 points)
Answer 2: P9,375 (P15,000 x 9/24) √ ( 2 points)
Answer 3: ( 4 points )
Journal Entries
Accounts Receivable 15,000 √
Premium Revenue 15,000 √
To record the gross premium revenue on May 1.

Premium Revenue 5,625 √

Unearned Premium Revenue 5,625 √
To record adjustment for unearned revenue

Problem 3. ( 4 points )
Answer 1: P16,250 [(48,000 x 13/24) - (18,00 X 13/24)] √ ( 2 points)
Answer2: P13,750 [(48,000 x 11/24) - (18,000 X 11/24)] √ ( 2 points)

Problem 4. ( 20 points )
Answer 1:
Month Gross premium Unearned Unearned Premium
Portion
Janjuary 25,000 1/24 1,041.67
February 20,000 3/24 2,500.00
March 30,000 5/24 6,250.00
April 26,000 7/24 7,583.33
May 18,000 9/24 6,750.00
June 21,000 11/24 9,625.00
July 42,000 13/24 22,750.00
August 16,000 15/24 10,000.00
September 10,000 17/24 7,083.33
October 18,000 19/24 14,250.00
November 20,000 21/24 17,500.00
December 16,000 23/24 15,333.33
Total 262,000 120,666.67
Month Premium Unexpired Unearned Premium Ceded
Ceded Portion
January 10,000 1/24 416.67√
February 8,000 3/24 1,000.00√
March 12,000 5/24 2,500.00√
April 13,000 7/24 3,791.67√
May 6,000 9/24 2,250.00√
June 7,000 11/24 3,208.33√
July 20,000 13/24 10,833.33√
August 7,000 15/24 4,375.00√
September 4,000 17/24 2,833.33√
October 8,000 19/24 6,333.33√
November 10,000 21/24 8,750.00√
December 8,000 23/24 7,666.67√
Total 113,000 53,958.33

Unearned Gross Premium 120,666.67√

Less: Unearned Premium Ceded 53,958.33√
Net Provision for Unearned Premiums 66,708.33√

Answer 2:
Month Gross premium Unearned Unearned Premium
Portion
Janjuary 25,000 23/24
February 20,000 21/24
March 30,000 19/24
April 26,000 17/24
May 18,000 15/24
June 21,000 13/24
July 42,000 11/24
August 16,000 9/24
September 10,000 7/24
October 18,000 5/24
November 20,000 3/24
December 16,000 1/24
Total 262,000 √141,333.33

Month Premium Unexpired Unearned Premium Ceded

Ceded Portion
Janjuary 10,000 23/24
February 8,000 21/24
March 12,000 19/24
April 13,000 17/24
May 6,000 15/24
June 7,000 13/24
July 20,000 11/24
August 7,000 9/24
September 4,000 7/24
October 8,000 5/24
November 10,000 3/24
December 8,000 1/24
Total 113,000 √59,041.67

Earned Gross Premiums P141,333.33√

Less: Earned Premium Ceded 59,041.67√
Net Premiums Earned P 82,291.67√