2012.Fall
The solution to this problem requires a formula for pre-paid expenses as the sum of the following quantities:
- commissions and brokerage expenses incurred (column 23)
- taxes,licenses and fees incurred (column 25)
- other acquisition, field supervisions and collection expenses incurred (column 27)
- and half of the general expenses incurred (50% of column 29)
But this formula is not actually provided in the source text. Pre-paid expenses for a particular line of business (versus for all lines of business combined) is an allocation calculated with this formula as given in the main wiki article [| here]:
Formula 2a: (PPE for UEP)A = PPERA x m(UEPA)
Now, the text does give a formula for net acquisition expense at the bottom of page 221 as the sum of:
- commissions and brokerage expenses incurred (column 23)
- taxes,licenses and fees incurred (column 25)
- other acquisition, field supervisions and collection expenses incurred (column 27)
- and half of the general expenses incurred (50% of column 29)
This is the same formula as above but applied to all lines of business combined instead of just a particular line. To apply the formula to a particular line, you have to make the assumption that the pre-paid expense can be calculated as a sum in the same way as net acquisition expense. But I'm not sure you would ever do it that way because pre-paid expenses are supposed to be calculated as an allocation.
So all in all, I think it was a bit of a contrived problem. (shout-out to SK!)
