Reference no: EM133032340

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 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?

$55,300

$82,950

$32,950

$35,000

Q3. Mia Corporation consigned 4,800 medical equipment costing $90 and retailing for $3,000 each to Andres Company. Freight cost of $4,800 was paid as freight expenses by the consignor. After a month, Mia received $213,030 in full settlement of the balance due. The consignor deducted a commission of $600 for each equipment sold, $270 for delivery expense and $300 for advertising expense. How many medical equipment were sold?

Q4. On January 1, 20x6, Bad, a real estate company, entered into a contract to construct a subdivision on a piece of land it has acquired and, when construction is complete, to deliver the finished houses to their customers. The following data pertains to the said contract each customer is to sign. Each house costs $4,000,000 each (a total of 10 houses are to be constructed). Construction will take 2 years to complete. Payment terms are 50% by the end of the 1st year, 25% at the end of the 2nd year and the balance will be paid after 3 months from the final turn-over. The client can transfer the contract to another, should they not feel satisfied with the house on or before the house is 50% complete.

The company incurred the following expenses for 20x6.

Total cost of land - $2,000,000;

Estimated total cost of construction - $25,000,000, (including the costs for the common areas, streets and light posts amounting to $5,000,000);

Estimated total cost of contract for the 10 houses - $40,000,000;

In CY 20x6, total construction cost incurred amount to $13,000,000 with all common areas already fully constructed, while fair value of the land is now worth $3,500,000. The contract is considered to be a multiple contract.

What is the amount of revenue to be recorded for the year by Bad?