AU 60 Final Exam Test Questions And Answers

AU 60 Final Exam Test Questions And
Answers
Apstart-
uppcompany,pNewpCorporation,pissuedp10,000psharespofpstockpwithpapparpvaluepofp$15paps
harepatp$20papshare.pWhatpispthepamountpofpNew'sppaid-inpcapital?p-
pCORRECTppANSWER-$200,000p(20x10k)




ABCpCompanyppurchasedpapbuildingpinpManhattanpinp1935.pTherepispnopmortgageponpthepp
roperty.pWhichponepofpthepfollowingpstatementspbestpdescribespaplimitationpofpthepfinancialp
statementspwhenpevaluatingpABC'spfinancialpposition?p-pCORRECTppANSWER-
Thepfairpvaluepofpthepbuildingpmaypbepmuchphigherpthanpcost.

ABCpInsurancepCompany'spactuaryphaspcalculatedptheppureppremiumpforpthepcompany'sph
omeowner'spinsuranceplinepasp$40.pFixedpexpensespforptheplineparep$2.50pperpexposurepun
itpandpvariablepexpensesparep12ppercent.pThepcompany'sploadingpforpprofitspandpcontingen
ciespisp5ppercent.pUsingptheppureppremiumpratemakingpmethodpandproundingptopthepneares
tpwholepdollar,pwhichponepofpthepfollowingpispthepratepperpexposurepunitpthatpABCpneedsptopc
harge?p-pCORRECTppANSWER-$51

Allpofpthepfollowingparepadvantagespofpthepsolepproprietorshipptypepofpbusinesspownership,p
EXCEPT:p-pCORRECTppANSWER-Limitedpliability

Allpofpthepfollowingparepobjectivespofpratepregulation,pEXCEPT:p-pCORRECTppANSWER-
Ratesppromotepavailabilitypandpaffordabilitypofpinsurance.

Allpofpthepfollowingparepreasonspthatpanpunderwriterpmightpwantptopobtainpinformationpinpadd
itionptopthepapplication,pEXCEPT:p-pCORRECTppANSWER-Toppostponepapdecision

Anpunderwriterpusespapfirm'spcurrentpassetspwhenpcalculatingpthepcurrentpratio.pCurrentpass
etsparep-pCORRECTppANSWER-Cashpandpeasily-liquidatedpassets.

Contractorspoftenpformpwhichponepofpthepfollowingpalternativepformspofpbusinesspownership
ptopperformpaplargepconstructionpproject?p-pCORRECTppANSWER-Jointpventure




HomepbuilderpJerrypBartonpengagedpanpelectricianptopinstallpoverheadpceilingpfanspinpmany
pnewphomes.pJerryppaidpthepelectricianpbypthephour,psupervisedphispwork,pandphadptheprightp