Reference no: EM133047676

Questions -

Q1. Statement 1: Proportional reinsurance is a form or reinsurance where corporate is ceded on the basis of a contract between the ceding insurer and the reinsurer, whereby the ceding insurer agreed to cede and the reinsurer agrees to accept automatically the reinsurance of the risk written by the ceding insurer, which fall within the scope of the agreement, subject to the limits and terms specified therein. Statement 2: Retrocession is a reinsurance assumed where the reinsurer will retrocede a whole or a part of the risk accepted from the direct insurer to another reinsurer. Statement 3: Ceding insurer is an insurer that reinsures part of the whole of a risk with one or more reinsurance, the risk is considered as an inward reinsurance.

Only Statement 1 is correct

Only Statement 1 is incorrect

Only Statement 2 is correct

Only Statement 2 is incorrect

Only Statement 3 is correct

Only Statement 3 is incorrect

All statements are correct

All statements are incorrect

Q2. On April 30, 2021, Ashley admits Bray for an interest in his business. On this date, Ashley's capital account shows a balance of $158,400. The following were agreed upon before the formation of the partnership:

- Prepaid expenses of $17,500 and accrued expenses of $5,000 are to be recognized

- 5% of the outstanding accounts receivable of Ashley amounting to $100,000 is to be recognized as uncollectible

Bray is to be credited with a 1/3 interest in the partnership and is to invest cash. How much cash is to be invested by Bray?

Q3. Alana Corporation signed a contract charging a customer $600,000 to change the windows of a customer's house. The contract includes costs for materials and labor. The company would charge $250,000 for materials if sold separately and $500,000 for labor if the customer will purchase the needed materials. What amount of the transaction price would the company allocate to its performance obligation to provide the needed services to the customer?