Reference no: EM133046865

Questions -

Q1. Statement 1: PFRS 17 allows and insurer to change its accounting policies for insurance contract only if, as a result of its financial statements present information that is more relevant. Statement 2: Outward Reinsurance is where the premium and commission shall be accounted for in the different accounting period original policy to which the reinsurance relates. Statement 3: Premium deficiency arises when the unearned premium reserve is less than the estimated claims related expenses.

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 May 1, 2021, Amanda and Brandy formed a joint operation to acquire and sell a special type of merchandise. The contractual arrangements provide that Amanda is to manage the joint operation for a fee and that gain and losses are to be divided equally. On May 1, 2021, Brandy invests cash of $52,000, which $50,000 was used to purchase merchandise. Amanda incurs expenses amounting to $2,500. On May 20, one half of the merchandise was sold for $36,000 cash. In the books of Brandy, how much is the balance of the Investment in Joint Operation account on May 30, 2021?

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?