LOMA 361 CORRECT EXAMS ANSWERS AND
QUESTIONS SET A+
✔✔Available cash - ✔✔= beginning cash balance + cash receipts
✔✔ Accounts increased by debits - ✔✔Assets
Expenses
(the DEA)
✔✔Accounts increased by credits - ✔✔Liabilities
Owners' Equity
Revenues
✔✔Contingency Risks - ✔✔C-1 = asset risk
C-2 = pricing risk
C-3 = interest-rate risk
C-4 = general management risk
(A PIG)
✔✔Difference in GAAP vs. Statutory accounting - ✔✔GAAP lists cash first on balance
sheet.
GAAP uses "Retained Earnings" as a capital account.
GAAP allows expenses to be recognized over time (i.e. "Deferred Acquisition Costs").
GAAP requires an Annual Report.
GAAP allows "Prepaid Expenses" as short-term assets.
GAAP does not allow modification of actuarial assumptions for reserves.
GAAP reserves calculated with "realistic" mortality, interest and withdrawal rates (with
PADs).
GAAP reserves smaller.
GAAP includes PV of policyowner dividends in policy reserves.
GAAP accounts for interest and principal on short-term and long-term debt separately.
GAAP Capital and Surplus accounts = "Additional Paid-In Capital" and "Retained
Earnings"
, GAAP considers "Surplus Notes" a liability account.
GAAP recognizes investment income on an accrual basis
✔✔Record of a purchase of an asset: - ✔✔"Asset A".......$$$
"Cash" and/or "Accts Payable--Asset A".......$$$
✔✔Record of a sale of an asset: - ✔✔"Cash" and/or "Accts Receivable--Asset
A"........$$$
Asset A ............$$$
✔✔Record of a policyowner's use of a dividend to reduce a policy premium: -
✔✔"Policyowner Divdends Applied to Premiums".......$$$
"Premium Income" ..................$$$
✔✔Record of a cash surrender: - ✔✔"Surrenders Paid"....$$$
Cash..............$$$
✔✔Record of wavier-of-premium rider use: - ✔✔"Waiver-of-premium benefits".........$$$
"Premium Income"...............$$$
✔✔Record of initial premium payment: - ✔✔"Cash" ....................$$$
"Premium Suspense"..............$$$
✔✔Short-term Assets - ✔✔Cash
Cash equivalents (T-bills)
Investment Income Due and Accrued
Deferred Premiums
Uncollected Premiums
Prepaid Expenses (NOT an admitted asset)
✔✔Admitted Assets - ✔✔Cash
Cash equivalents
Real estate
Investment income due and accrued
Deferred premiums
Uncollected premiums
✔✔Nonadmitted Assets - ✔✔Furniture
Prepaid expenses (for statutory accounting only)
Personal property
Producer balances due
✔✔Record of Nonforfeiture options - ✔✔Cash Surrender: Debit "Surrenders Paid",
Credit "Cash"
QUESTIONS SET A+
✔✔Available cash - ✔✔= beginning cash balance + cash receipts
✔✔ Accounts increased by debits - ✔✔Assets
Expenses
(the DEA)
✔✔Accounts increased by credits - ✔✔Liabilities
Owners' Equity
Revenues
✔✔Contingency Risks - ✔✔C-1 = asset risk
C-2 = pricing risk
C-3 = interest-rate risk
C-4 = general management risk
(A PIG)
✔✔Difference in GAAP vs. Statutory accounting - ✔✔GAAP lists cash first on balance
sheet.
GAAP uses "Retained Earnings" as a capital account.
GAAP allows expenses to be recognized over time (i.e. "Deferred Acquisition Costs").
GAAP requires an Annual Report.
GAAP allows "Prepaid Expenses" as short-term assets.
GAAP does not allow modification of actuarial assumptions for reserves.
GAAP reserves calculated with "realistic" mortality, interest and withdrawal rates (with
PADs).
GAAP reserves smaller.
GAAP includes PV of policyowner dividends in policy reserves.
GAAP accounts for interest and principal on short-term and long-term debt separately.
GAAP Capital and Surplus accounts = "Additional Paid-In Capital" and "Retained
Earnings"
, GAAP considers "Surplus Notes" a liability account.
GAAP recognizes investment income on an accrual basis
✔✔Record of a purchase of an asset: - ✔✔"Asset A".......$$$
"Cash" and/or "Accts Payable--Asset A".......$$$
✔✔Record of a sale of an asset: - ✔✔"Cash" and/or "Accts Receivable--Asset
A"........$$$
Asset A ............$$$
✔✔Record of a policyowner's use of a dividend to reduce a policy premium: -
✔✔"Policyowner Divdends Applied to Premiums".......$$$
"Premium Income" ..................$$$
✔✔Record of a cash surrender: - ✔✔"Surrenders Paid"....$$$
Cash..............$$$
✔✔Record of wavier-of-premium rider use: - ✔✔"Waiver-of-premium benefits".........$$$
"Premium Income"...............$$$
✔✔Record of initial premium payment: - ✔✔"Cash" ....................$$$
"Premium Suspense"..............$$$
✔✔Short-term Assets - ✔✔Cash
Cash equivalents (T-bills)
Investment Income Due and Accrued
Deferred Premiums
Uncollected Premiums
Prepaid Expenses (NOT an admitted asset)
✔✔Admitted Assets - ✔✔Cash
Cash equivalents
Real estate
Investment income due and accrued
Deferred premiums
Uncollected premiums
✔✔Nonadmitted Assets - ✔✔Furniture
Prepaid expenses (for statutory accounting only)
Personal property
Producer balances due
✔✔Record of Nonforfeiture options - ✔✔Cash Surrender: Debit "Surrenders Paid",
Credit "Cash"
