AU 60 Practice Test Attempt #1 Questions And Answers

AU 60 Practice Test Attempt #1
Questions And Answers
AcepWoodworkingpCompanypmakesphouseholdpfurniture.pWhichponepofpthepfollowingpbestp
describespanpexpensepthatpshouldpbepclassifiedpaspanpoperatingpexpenseponpAce'spincome
pstatement?p-pCORRECTppANSWER-Utilitypchargespforpthepmanufacturingpplant.




Allpofpthepfollowingparepadvantagespofpthepsolepproprietorshipptypepofpbusinesspownership,p
EXCEPT:p-pCORRECTppANSWER-Limitedpliability.

Anpinsurancepcompanypneedsptophirepanpemployeepwithpknowledgepofpinsuranceppolicypfor
mspandpthepabilityptoprelateppolicypprovisionsptoptheplosspexposurespofpindividualppolicyhold
ers.pTheppersonpwillpalsopprepareppremiumpquotespandpprocesspcancellations.pWhichponep
ofpthepfollowingpemployeespwouldpbestpsuitpthepcompany'spneeds?p-
pCORRECTppANSWER-Linepunderwriter.




Anpunderwriterpispconductingpratiopanalysispandpnoticespthatpapcompanyphasp$1.5pmillionpin
plong-

termpdebt,p$3pmillionpinpshareholder'spequity,pandp$5pmillionpinpassets.pWhichponepofpthepfol
lowingpstatementspisptruepbasedponpthepcompany'spdebtptopequitypratio?p-
pCORRECTppANSWER-

Thepdebtptopequitypratiopisp.50pandpthepcompanypispmostlypfinancedpbypequity.

Anpunderwriterpreceivespaprenewalpapplicationpforpappropertypquotepfromphispproducer.pThe
papplicantphasphadpapseriespofpsmallplossespinptheprecentppast.pThepunderwriterpispdebatingp

whetherptoprejectpthepsubmissionporpquotepitpwithpappropertypdeductiblepofp$5,000.pDuringpw
hichponepofpthepfollowingpstepspinpthepunderwritingpprocesspispthepunderwriterpinvolved?p-
pCORRECTppANSWER-Developingpunderwritingpalternatives.




Anpunderwriterpseekingptopgainpinsightpintopthepactivitiespthatpmightpbepconductedpbypanpap
plicantpwouldpusepwhichponepofpthepfollowingpresources?p-pCORRECTppANSWER-
NorthpAmericanpIndustrypClassificationpSystem.

Anypfactorpthatpresultspinpapgappbetweenpthepintendedpmessagepandpthepperceivedpmessa
gepispreferredptopas:p-pCORRECTppANSWER-Noise.

Assetsponpthepbalancepsheetparepclassifiedpaspcurrentpandpnoncurrent.pWhichponepofpthepfo
llowingpispclassifiedpaspapnoncurrentpasset?p-pCORRECTppANSWER-
Apcopyrightpthatpexpirespinp10pmonths.

, Commonpsizepstatementsparepfrequentlypusedpduringpverticalpanalysis.pWhichponepofpthepf
ollowingpisptruepregardingpcommonpsizepstatements?p-pCORRECTppANSWER-
Commonpsizepstatementsparepgoodpforpinter-
companypcomparisonspbecauseptheypcorrectpforpdifferencespinpcompanypsize.

Duringpapgeneralpmarketpconductpexaminationpofpunderwriting,pexaminerspwouldplookpforpe
videncepofpallpofpthepfollowing,pEXCEPT:p-pCORRECTppANSWER-
Inconsistentpclaimppractices.

Experiencepratingpplanspcanpbepusedptopmodifypratespofpindividualpaccounts.pWhichponepofp
thepfollowingpispapbenefitpofpexperiencepratingpplans?p-pCORRECTppANSWER-
Experiencepratingpplanspencouragepthepinsuredptopimplementpriskpcontrolpmeasures.

Financialpstatements:p-pCORRECTppANSWER-
Canpbepusedpbypagentspandpbrokersptopassesspcoveragepneeds.

Howpmanypyearspofplosspexperiencepdopmostpstatesprequirepinsurersptopusepforpfirepinsuran
cepratemakingppurposes?p-pCORRECTppANSWER-5pyears.

Ifpapcompany'spinventorypturnoverpratiopisphigherpthanpthepindustrypbenchmark,pitpindicatesp
that:p-pCORRECTppANSWER-
Thepcompanypispsellingpitspinventorypmorepquicklypthanpitspcompetitors.

Ifpanpaccountpispexperiencedprated,pforpwhichpofpthepfollowingpreasonspmightpanpunderwrite
rphaveptopcontactptheppriorpcarrier?p-pCORRECTppANSWER-
Topconfirmporpupdateptheplossphistorypprovidedpbypthepinsured.

Inpadditionptophavingpaplargepnumberpofpexposurepunits,pviablepriskptransferprequirespthatpex
posurepunitspbe:p-pCORRECTppANSWER-Independentpandphomogenous.

Inpratemaking,pthepcomponentpincludedptoppaypfuturepclaimspandplosspadjustmentpexpense
spispreferredptopas:p-pCORRECTppANSWER-Prospectiveplosspcosts.

Inpwhichponepofpthepfollowingptypespofplinespofpinsurancepdopunderwriterspusuallyphavepextr
emepflexibilitypinpaccountppricingpandparepableptopdeveloppratespwithoutpactuarialpinterventi
on?p-pCORRECTppANSWER-Marinepinsurance.

Informationpefficiencypreferspto:p-pCORRECTppANSWER-
Howpthepvaluepofpthepinformationptopunderwritingpdecisionspmustpbepweighedprelativeptopitsp
expensepandpitsptimeliness.

InsurancepCompanyp(IC)preportspthepinformationpbelowpforpitspautomobilepinsurancepline.p
Usingptheppureppremiumpratemakingpmethod,pwhichponepofpthepfollowingpispthepratepperpex
posurepunit,proundedptopthepnearestpdollar,pforpIC'spautomobileplinepofpbusiness?p-
pCORRECTppANSWER-$66.