P150.000. so the total cost of sales was PT50.000. Commissions incurred from short-duration insurance contracts are recognized as expense over the period of the contracts using the 24th method. The portion of the commissions that relates to the unexpired periods of the policies at reporting date is accounted for as \"Deferred acquisition costs\" and presented in the asset section of the statement of f'mancial position. 2 Deferred Acquisition Costs (DEC) 000.000 Other Underwriting Expenses 150.000 Cash 750.000 To record acquisition costs that must be amortized over the poiity period and other undetwriting expenses d. Assume that on November 5. 2019. a massive Windstorm destroyed many of the homes insured by BEN. BEN adjustersI working rapidly. estimated that total losses amounted to P1.500.000. Loss adjustment expenses, the costs of determining and settling losses. were estimated at P100,000. The managers of BEN recognized that they were facing serious cash ow problems and sold no further policies for the rest of the year. During the period of operation. from JuJy 1 to Dec. 31. 2019. record also the adjustments to income and expense using the 24'1' method and the spending of P50.000 on general husinessiunderwriting expenses. 3 Losses - Direct Business 1.500.000 Loss Adjustment Expenses - Direct 100.000 Cash 1.000.000 To record losses incurred Gross Premiums - Direct Business 1.625.000 Uneamed premium reserve 1.025.000 To record nneonted portion of premium income using 24:}: method Other Underwriting Expenses 50,000 Cash 50,000 To record other underwriting expenses Commission Expense - Direct 325,000 Deferred Acquisition Costs (DAC) 325,000 To record amortization of DAC using 24th methoda. The BEN Insurance Corp. started non-life insurance business with the sale of 10.000 shares of common stock on lull;-r l, 2019. The stock had a par value of P20 a share but sold for P100. If all the shares were sold in one day... the company's balance sheet at the end of that dag-r would look like this: Assets liabilities Cash 1.000.000 Unearned premiums - Surplus Capital stock 200.000 Capital paid in excess of par 800.000 Surplus [$000,000 Total meta 1,000,000 Total Liabilities and Surplus 1,000,000 h. On the rst day of regular operationsI BRN sold 10.000 onevear homeowners' policies and collected premiums amounting to P3.000.000. Prepare jouma] entry to record this transaction. No. Accounts Dr Cr 1 Cash 3.0m.000 Gross Premiums - Direct Business 3.000.000 To record direct written premiums c. The following dag.r BRNs accountants computed the expenses involved in selling those policies. These expenses included the agent's commissions of20 percent (P600300), and miscellaneous expenses for printing. filling out and mailing the policies, for record keeping. and for paving state tax on premiums. These miscellaneous expenses came to
