AIAF 114 CHAPTER #2 PRACTICE EXAM
QUESTIONS AND ANSWERS
As a component of insurer income, other income consists of revenues and expenses
that are not related to income from either - ANSWER-Underwriting or investment
activities.
An insurer's income statement can be described as a financial statement that shows the
- ANSWER-Relationship between revenues, expenses, and net income.
An applicant/insured may pay the premium to his or her insurance agent. How are
premium balances due from an agent accounted for on an insurer's financial statements
under statutory accounting principles (SAP)? - ANSWER-Premium balances due from
agents are an admitted asset unless they are more than 90 days past due.
Which one of the following statements concerning the uses and differences between
Generally Accepted Accounting Principles (GAAP) and Statutory Accounting Principles
(SAP) is true? - ANSWER-GAAP treats a business as a going concern and focuses on
measuring income, while SAP focuses on solvency and meeting policyholder
obligations
The two principal insurer liabilities that arise from the sale of insurance policies are loss
reserves and - ANSWER-Unearned premium reserves
The largest asset for many insurance companies is their investment in bonds. Under
statutory accounting principles (SAP), how is a bond valued on an insurance company's
balance sheet? - ANSWER-At the bond's amortized cost
When premiums earned during any specific accounting period are less than incurred
losses plus underwriting expenses incurred during the period, there will be an -
ANSWER-Underwriting loss.
A principal liability of insurers is the unearned premium reserve. Which one of the
following statements best describes the unearned premium reserve? - ANSWER-The
unearned premium reserve represents premiums paid but not yet earned
Unrealized capital gains are not included in accounting income. Under statutory
accounting principles (SAP), unrealized capital gains are included in - ANSWER-
Policyholders' surplus.
How does the accounting for pension contributions that an insurer makes for nonvested
employees differ under statutory accounting principles (SAP) and generally accepted
accounting principles (GAAP)? - ANSWER-Under SAP, the contributions are not tax
deductible; under GAAP, the contributions are tax deductible.
QUESTIONS AND ANSWERS
As a component of insurer income, other income consists of revenues and expenses
that are not related to income from either - ANSWER-Underwriting or investment
activities.
An insurer's income statement can be described as a financial statement that shows the
- ANSWER-Relationship between revenues, expenses, and net income.
An applicant/insured may pay the premium to his or her insurance agent. How are
premium balances due from an agent accounted for on an insurer's financial statements
under statutory accounting principles (SAP)? - ANSWER-Premium balances due from
agents are an admitted asset unless they are more than 90 days past due.
Which one of the following statements concerning the uses and differences between
Generally Accepted Accounting Principles (GAAP) and Statutory Accounting Principles
(SAP) is true? - ANSWER-GAAP treats a business as a going concern and focuses on
measuring income, while SAP focuses on solvency and meeting policyholder
obligations
The two principal insurer liabilities that arise from the sale of insurance policies are loss
reserves and - ANSWER-Unearned premium reserves
The largest asset for many insurance companies is their investment in bonds. Under
statutory accounting principles (SAP), how is a bond valued on an insurance company's
balance sheet? - ANSWER-At the bond's amortized cost
When premiums earned during any specific accounting period are less than incurred
losses plus underwriting expenses incurred during the period, there will be an -
ANSWER-Underwriting loss.
A principal liability of insurers is the unearned premium reserve. Which one of the
following statements best describes the unearned premium reserve? - ANSWER-The
unearned premium reserve represents premiums paid but not yet earned
Unrealized capital gains are not included in accounting income. Under statutory
accounting principles (SAP), unrealized capital gains are included in - ANSWER-
Policyholders' surplus.
How does the accounting for pension contributions that an insurer makes for nonvested
employees differ under statutory accounting principles (SAP) and generally accepted
accounting principles (GAAP)? - ANSWER-Under SAP, the contributions are not tax
deductible; under GAAP, the contributions are tax deductible.
