1. On July 1, Year 1, P&G Company bought $24,000 of equipment. On December 31st Year 6, equipments accumulated depreciation totaled $20,000 and company sold equipment for $7,000. Based on this information:
a. Company would identify $4,000 gain.
b. Sale would result in a $3,000 increase in total assets.
c. Comapny would report a $4,000 cash outflow.
d. Both (a) and (b)
e. All of above.
2. XYZ Insurance Company's Year 1 premiums written and policy acquisition costs are $1,600,000 and $300,000 respectively. As policies cover July 1, Year 1 through June 30, Year 2, half premiums are earned by the end of Year 1. Year 1 loss and loss adjustment expense reserves incurred total $600,000. Insurer bought pro rata reinsurance immediately upon writing policies and ceded 80% of premium, losses, and loss adjustment expenses to reinsurer. Reinsurer paid insurer a 20% ceding commission. Calculate ceding commission. Choose answer from below:
a. $233,000
b. $208,000
c. $160,000
d. $256,000
e. $300,000
Calculate surplus relief generated from reinsurance transaction.
a. $576,000
b. $295,000
c. $422,000
d. $258,000
e. None of above