1.

Assume that total premium accrued and collected by Misr Insurance

Company, Fire Branch, during 2020 are as follows:

January 60,000
February 85,000
March 39,000
April 28,400
May 56,000
June 30,000
July 40,000
August 78,000
September 27,800
October 53,200
November 46,400
December 29,200
Total 573,000

Additional Information:

1. Administrative and general expenses were estimated to be 20% of the

total amount of provision.
2. An additional provision of 10% must be calculated because of increased
rates of actual losses.
Required:

1. Calculate the provision for unexpired risks using the quarterly pro rata
method
2. If provision for outstanding claims equal L.E 250,000 and provision for
loss ratio fluctuations equal L.E 160,000, prepare the closing journal entry
at the end of the year
Solution:

1.

Quarter 1= 60,000+ 85,000+ 39,000= L.E 184,000 *1/8= 23,000

Quarter 2= 28,400+ 56,000+ 30,000= L.E 114,400* 3/8= 42,900

Quarter 3= 40,000+78,000+ 27,800= L.E 145,800* 5/8= 91,125

Quarter 4= 53,200+ 46,400+ 29,200= L.E 128,00* 7/8 = 112,700

Total = 269,725

Deduct 20% administrative expenses (53,945)

+ 10% for additional provision 57,300

Total amount of provision for unexpired risk 273,080

2.

Revenues and Expenses account 683080

Provision for unexpired risks 273080

Provision for outstanding claims 250000

Provision for loss ratio fluctuation 160000