Insurance

Management Fees earned by Life and Non-life Insurance Companies are subject to 2% PT and VAT, respectively.

• True

• False

S1: Investment expenses relating to investment income that has been subjected to final tax should not form part of direct cost; neither are they deductible in determining the net taxable income.

S2: Investment expenses relating to investment income that has not been subjected to final tax are allowed as deduction as part of the direct costs.

• S1 is True, S2 is False

• S1 is False, S2 is True

• Both statements are True

• Both statements are False

Every person, company doing non-life insurance business of any sort in the Philippines, except purely cooperative companies or associations, is subject to the 2% Premium Tax (PT).

• FALSE

• TRUE

Investment income earned by the life insurance company from the investment activities using the fund, in the addition to the Income tax, is subject to ____

• 12% VAT

• 2% PT

• RCIT

An Insurance Company make the following entries upon the Actual disbursement of policyholder/beneficiary:

• DR Losses and Claims Expense

  CR Losses and Claims Payable

• DR Losses and Claims Expense

  CR Cash

• DR Losses and Claims Payable

  CR Losses and Claims Expense

• DR Cash

  CR Losses and Claims Expense

Investment Income of Life Companies from Invested Insurance Premium is subject to

• Depending on the nature of Income

• 2% PT

• 12% VAT

• Exempt

The following are direct costs except:

• Commission on direct writings

• Inspection and Medical Fees

• Reinsurance Ceded

• Renewal Fees

ABC Co., a non-life insurance company, gave the following date for the month:

Premiums on health and accident insurance 500,000

Premiums on non-life insurance 800,000

Re-insurance premiums 300,000

Investment income on marketable securities 100,000

Reinsurance commissions Insurance 200,000

(a)  

Determine the correct amount of deductible expense:

Direct Losses 2,500,000

Commission Expense 1,000,000

Underwriting Expense 1,250,000

Salaries, wages, and employee benefits of personnel:

Directly engaged in actuary services 1,870,000

Directly engaged in marketing services 950,000

Inspection and Medical Fees 850,000

IBNR, beginning 420,000

IBNR, ending 550.000

Unearned Premiums reserve, beginning 800,000

Unearned Premiums reserve, ending 2,300,000

(a)  

Compute for the gross income of Apol Insurance Company using the following data:

Non-life premiums (1 year to run) 10,000,000

Net addition to reserve fund (required) 4,000,000

Marketing expense (compliant to Sec. 34 of TC, as amended) 500,000

Salaries, wages, and other employee benefits

of personnel related to four stages of insurance process 1,000,000

(a)