LOMA 371 TEST BANK QUESTIONS WITH
VERIFIED ANSWERS FULL REVIEW
●● Historical Cost
Answer: "the price originally paid for the asset. This is a simple asset
valuation method because nearly all assets have a readily determinable
historical cost. On the date of purchase, an asset's historical cost equals
its book value."
●● Book value
Answer: "the value at which a company records the asset in its
accounting records and reports the asset on its balance sheet."
●● Amortization
Answer: the reduction of a loan balance through payments made over a
period of time
"typically applies to certain long-term assets such as bonds and
mortgages, is the periodic and systematic increase or decrease of the
original cost of an investment to its ultimate value at maturity."
●● amortized cost
Answer: "the asset's book value after its cost has been adjusted for
applicable amortization"
,●● Accumulate Depreciation
Answer: "The total amount of depreciation allocated to an asset as of a
specified date"
●● fair value
Answer: "the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
on the valuation date."
●● fair value accounting
Answer: The process of valuing a company's balance sheet accounts,
including assets, on the price that the asset would bring in an active,
organized market in which (1) the asset sale is not the result of
liquidation, and (2) neither the buyer nor the seller is forced to enter the
transaction.
The purpose is to provide transparent, validated information about the
values for a company's balance sheet accounts.
●● Securities Valuation Office (SVO)
Answer: responsible for the ongoing credit quality assessment and
valuation of securities owned by state-regulated insurance companies.
,●● Automated valuation service
Answer: "provides access to the Valuation of Securities (VOS) database,
from which an insurer can quickly price its securities for the Annual
Statement."
●● Realized Capital Gain (Loss)- SAP-debt security
Answer: The taxable profit or loss resulting from the purchase and sale
of a security. It is the difference between the sales proceeds and the
investment's cost basis.
"For an asset, the net sales proceeds equal the gross sales proceeds, or
selling price, minus any sales commissions and other costs associated
with the sale of the asset. If the net sales proceeds from the debt security
are greater than its book value, then the result is a realized capital gain;
if the net sales proceeds are less than the debt security's book value, then
the result is a realized capital loss."
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●● Unrealized capital gain loss -SAP-debt security
Answer: "the difference between the debt security's fair value and its
book value. If the fair value of the debt security is greater than its book
value, then the result is an unrealized capital gain; if the fair value is less
than the debt security's book value, then the result is an unrealized
capital loss."
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, ●● Realized Capital Gain (Loss)- GAAP- debt security
Answer: "the difference between the debt security's net sales proceeds
and its amortized cost. If the net sales proceeds from the debt security
are greater than its amortized cost, then the result is a realized capital
gain; if the net sales proceeds are less than the debt security's amortized
cost, then the result is a realized capital loss."
●● unrealized capital gain loss- GAAP- debt security
Answer: "the difference between the fair value of the debt security and
its amortized cost. If the fair value of a debt security is greater than its
amortized cost, then the result is an unrealized capital gain; if the fair
value is less than the debt security's amortized cost, then the result is an
unrealized capital loss."
●● Realized Capital Gain (Loss)- ES
Answer: On a equity security is the difference between the equity
security's net sales proceeds and its historical cost. If the net sales
proceeds from the equity security are greater than its historical cost, then
the result is a realized capital gain; if the net sales proceeds are less than
the equity security's historical cost, then the result is a realized capital
loss."
"Under GAAP and SAP, realized and unrealized capital gains on equity
securities are generally calculated the same way"
●● unrealized capital gain loss- ES
VERIFIED ANSWERS FULL REVIEW
●● Historical Cost
Answer: "the price originally paid for the asset. This is a simple asset
valuation method because nearly all assets have a readily determinable
historical cost. On the date of purchase, an asset's historical cost equals
its book value."
●● Book value
Answer: "the value at which a company records the asset in its
accounting records and reports the asset on its balance sheet."
●● Amortization
Answer: the reduction of a loan balance through payments made over a
period of time
"typically applies to certain long-term assets such as bonds and
mortgages, is the periodic and systematic increase or decrease of the
original cost of an investment to its ultimate value at maturity."
●● amortized cost
Answer: "the asset's book value after its cost has been adjusted for
applicable amortization"
,●● Accumulate Depreciation
Answer: "The total amount of depreciation allocated to an asset as of a
specified date"
●● fair value
Answer: "the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
on the valuation date."
●● fair value accounting
Answer: The process of valuing a company's balance sheet accounts,
including assets, on the price that the asset would bring in an active,
organized market in which (1) the asset sale is not the result of
liquidation, and (2) neither the buyer nor the seller is forced to enter the
transaction.
The purpose is to provide transparent, validated information about the
values for a company's balance sheet accounts.
●● Securities Valuation Office (SVO)
Answer: responsible for the ongoing credit quality assessment and
valuation of securities owned by state-regulated insurance companies.
,●● Automated valuation service
Answer: "provides access to the Valuation of Securities (VOS) database,
from which an insurer can quickly price its securities for the Annual
Statement."
●● Realized Capital Gain (Loss)- SAP-debt security
Answer: The taxable profit or loss resulting from the purchase and sale
of a security. It is the difference between the sales proceeds and the
investment's cost basis.
"For an asset, the net sales proceeds equal the gross sales proceeds, or
selling price, minus any sales commissions and other costs associated
with the sale of the asset. If the net sales proceeds from the debt security
are greater than its book value, then the result is a realized capital gain;
if the net sales proceeds are less than the debt security's book value, then
the result is a realized capital loss."
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●● Unrealized capital gain loss -SAP-debt security
Answer: "the difference between the debt security's fair value and its
book value. If the fair value of the debt security is greater than its book
value, then the result is an unrealized capital gain; if the fair value is less
than the debt security's book value, then the result is an unrealized
capital loss."
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, ●● Realized Capital Gain (Loss)- GAAP- debt security
Answer: "the difference between the debt security's net sales proceeds
and its amortized cost. If the net sales proceeds from the debt security
are greater than its amortized cost, then the result is a realized capital
gain; if the net sales proceeds are less than the debt security's amortized
cost, then the result is a realized capital loss."
●● unrealized capital gain loss- GAAP- debt security
Answer: "the difference between the fair value of the debt security and
its amortized cost. If the fair value of a debt security is greater than its
amortized cost, then the result is an unrealized capital gain; if the fair
value is less than the debt security's amortized cost, then the result is an
unrealized capital loss."
●● Realized Capital Gain (Loss)- ES
Answer: On a equity security is the difference between the equity
security's net sales proceeds and its historical cost. If the net sales
proceeds from the equity security are greater than its historical cost, then
the result is a realized capital gain; if the net sales proceeds are less than
the equity security's historical cost, then the result is a realized capital
loss."
"Under GAAP and SAP, realized and unrealized capital gains on equity
securities are generally calculated the same way"
●● unrealized capital gain loss- ES
