Name: Ortega, Jacqueline L.

Course & Year: BS Accountancy 3

MODULE 7
HOME OFFICE, BRANCH AND AGENCY ACCOUNTING

PROBLEM 1: TRUE OR FALSE

1. Maker Co., a manufacturer and dealer of household appliances, agrees to indemnify a

customer for any loss or damage that the customer sustains from the use of a purchased
appliance. The contract to indemnify the customer in case of a loss event is accounted
FALSE for under PFRS 4.
2. Under an insurance contract, the party that has a right to compensation if the insured
FALSE event occurs is referred to as the insurer.

Use the following information for the next three questions:

Ms. Banana obtains a health insurance from Monkey Insurance Co. Monkey Co insures the
health of Ms. Banana with Bacchus Insurance Co.
TRUE 3. The contract between Monkey and Bacchus is referred to as a reinsurance contract.
FALSE 4. Ms. Banana is referred to as the cedant.
FALSE 5. Monkey is referred to as the reinsurer.
6. Transfer of significant insurance risk from the issuer to the policyholder is one of the
FALSE characteristics of an insurance contract
7. Under the general model of PFRS 17, a group of insurance contracts is initially
FALSE measured at the fulfillment cash flows.

Use the following information for the next two questions:

Entity A obtains life insurance for its key employee from Entity B (an insurance company).
Entity B cedes the insurance contract with Entity A to Entity C, another insurance company.

TRUE 8. The contract between Entity A and Entity B is a direct insurance contract.
9. Entity B account for the insurance contract with Entity C using the modified version of
FALSE the general model applicable for onerous insurance contracts.
10. According to PFRS 17, an insurance contract is not derecognized when its terms have
FALSE been modified and the modification is substantive.
TRUE 11. Insurance risk includes which of the lapse or persistency risk and expense risk.

Use the following information for the next two questions:

Entity A obtains insurance life insurance for its key employee from Entity B (an insurance
company). Entity B cedes the insurance contract with Entity A to Entity C, another insurance
company.

TRUE 12. The contract between Entity A and Entity is direct insurance contract.
13. Entity C account for the insurance contract with Entity B using the general model or the
TRUE premium allocation approach
14. The significant risk that is transferred from the policyholder to the issuer of an
TRUE insurance contract is insurance risk.
TRUE 15. According to PFRS 17, insurance service result is recognized in profit or loss.
16. Principle of full disclosure refers to the legal principle that all material facts concerning
FALSE an insurance contract must be made known to the contracting parties.
 17. Mr. Pyromaniac obtained fire insurance for his house. During the year, Mr.
Pyromaniac's house was burned. The legal principle which prohibits Mr. Pyromaniac
FALSE from earning profit from the loss event is Principle of subrogation
18. Mr. Pyromaniac obtained two fire insurances for his house. During the year, Mr.
Pyromaniac's house was burned. The legal principle which prohibits Mr. Pyromaniac
from collecting twice from his insurers in respect of the same loss event is Principle of
FALSE indemnity.