[Fa] Prepaid Legal Service-Individual Case Study Essay

1261 Words Dec 7th, 2012 6 Pages
Prepaid legal Service 1. How does PPLS create value for its customers? What are the critical risks that it has to manage well?
Prepaid Legal Service (PPLS) provide a legislation service that members could receive law service by paying small amount of money on monthly bases. When members have legal issues, PPLS could access them to attorney network to sue or pay related compensation for those who have their own attorney. Therefore, members would feel that someone would back them up, and that’s the greatest value for its customers. Furthermore, they create a “Family plan” which provides a comprehensive protection for a family. Since their target customer is for middle-income Americans, it is widely accepted and the number of membership
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How does Pre-Paid Legal account for the transactions described in question 2? Set up Commission Advance (gross), Commission Expense, Allowance, and Cash T Account, and trace the flows in and out of these accounts for years 1 to 3.

Commission advance | Year 1 | 171750 | 57250 | Bal | 114500 | | Year 2 | 114500 | 42937.5 | Bal | 71562.5 | | Year 3 | 71562.5 | 32231.75 | Bal | 39330.75 | |

Commission Expense | Year 1 | 57525 | | Year 2 | 42973.5 | | Year 3 | 32231.75 | |
Computation for year 1: 1000*229*0.25=57525
Computation for year 2: 750*229*0.25=42973.5
Computation for year 3: 563*229*0.25=32231.75

Allowance | Year 2 | | 3578.13 | Write-off | 3578.13 | | Year 3 | | 1338 | Write-off | 1338 | |
Computation for year 2: (1000-750)*229*0.5*2*0.25*0.25=3578.13
Computation for year 3: (750-563)*229*0.5*0.25*0.25=1338

Cash | Year 1 | | 171750 | Year 2 | 10734.38 | | Year 3 | 4,014.66 | | Ending | | 157000.96 |

4. Do you agree with Fortune’s criticism of PPLS’s method of reporting for commissions? Why or why not?

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