AU 60 TEST QS CHPTS 5-8
QUESTIONS & ANSWERS(GRADED
A+)
Bob's Manufacturing has been in business for one year. Which one of the following is
true regarding Bob's year-end financial statements? - ANSWERThe beginning
balance on the statement of changes in shareholders' equity will show as $0.
Random Insurance Company, specializing in property and casualty insurance, is
considering purchasing Infinity Insurance Company to increase its competitive
position in the marketplace, broaden its coverage area across the United States, and
utilize technological efficiencies. After Random Insurance Company's accountants
review the notes to financial statements found in Infinity Insurance Company's most
recent annual statement, the accountants provide management with a revised offer
price reflecting a significant downward adjustment from their original estimate. The
accountants explain to management that the adjustment was made based on a
disclosure - ANSWERRegarding a potential liability due to pending litigation.
Which one of the following statements is correct with respect to communication? -
ANSWERVerbal messages should have some demonstrable utility or relevance for
the receiver.
An insurer's comprehensive income includes - ANSWERUnrealized gains and losses
on securities.
An organization's financial statements can help identify key property loss exposures.
In which financial statement would an organization identify property loss exposures
in the cash from investing section? - ANSWERStatement of cash flows
The four primary types of financial statements include the income statement, the
statement of changes in owners' equity, the statement of cash flows, and the -
ANSWERBalance sheet.
The income statement provides a detailed explanation of the results of the
organization's operations. Net income is found on the income statement as well as
the - ANSWERStatement of changes in shareholders' equity.
Which one of the following is a major purpose of the statement of cash flows? -
ANSWERIt is used to assess an organization's need for additional financing.
Which one of the following statements is correct regarding underwriter and producer
relationships? - ANSWERFamiliarity allows an individual to understand the other
party's intentions, expectations, and motivations.
, Which one of the following accounting principles may cause a limitation in the use of
financial statements to evaluate an organization? - ANSWERThe cost principle
The balance sheet provides a snapshot of an organization's financial condition -
ANSWERAt a given point in time.
The report of management is a report to the users of financial statements, required
as part of the company annual report. Which one of the following is true regarding
this report? - ANSWERThe chairman of the board signs it acknowledging the
integrity of the report.
Why are qualitative assets of an organization, such as management and productivity,
so hard to quantify? - ANSWERIt is extremely difficult to measure these qualitative
assets.
How is the value of an insurer's reputation typically reflected on its balance sheet? -
ANSWERNot recorded
The four primary types of financial statements include the balance sheet, the income
statement, the statement of cash flows, and the - ANSWERStatement of changes in
owners' equity.
Gross profit is reported on the income statement. How is gross profit calculated? -
ANSWERGross profit = sales - cost of goods sold
Which of the following best describes the result of the four major financial statements
all taken together? - ANSWERThe financial condition of the organization.
Home Housewares Inc. is a retail store applying for commercial coverage with ABC
Insurance. The underwriter requested a copy of Home Houseware's most recent
financial statements. The underwriter will use the balance sheet to determine -
ANSWERHome Houseware's financial position as of the balance sheet date.
Ace Woodworking Company makes household furniture. Which one of the following
best describes an expense that should be classified as an operating expense on
Ace's income statement? - ANSWERUtility charges for the manufacturing plant
The U.S. Securities and Exchange Commission (SEC) requires a publicly traded
company to keep its shareholders informed. Which one of the following is the most
likely way that companies meet this requirement? - ANSWERThe company annual
financial report
Which one of the following groups of financial statements, when considered together,
would best present an organization's financial condition? - ANSWERThe balance
sheet, the income statement, the statement of change in shareholders' equity, and
the statement of cash flow.
QUESTIONS & ANSWERS(GRADED
A+)
Bob's Manufacturing has been in business for one year. Which one of the following is
true regarding Bob's year-end financial statements? - ANSWERThe beginning
balance on the statement of changes in shareholders' equity will show as $0.
Random Insurance Company, specializing in property and casualty insurance, is
considering purchasing Infinity Insurance Company to increase its competitive
position in the marketplace, broaden its coverage area across the United States, and
utilize technological efficiencies. After Random Insurance Company's accountants
review the notes to financial statements found in Infinity Insurance Company's most
recent annual statement, the accountants provide management with a revised offer
price reflecting a significant downward adjustment from their original estimate. The
accountants explain to management that the adjustment was made based on a
disclosure - ANSWERRegarding a potential liability due to pending litigation.
Which one of the following statements is correct with respect to communication? -
ANSWERVerbal messages should have some demonstrable utility or relevance for
the receiver.
An insurer's comprehensive income includes - ANSWERUnrealized gains and losses
on securities.
An organization's financial statements can help identify key property loss exposures.
In which financial statement would an organization identify property loss exposures
in the cash from investing section? - ANSWERStatement of cash flows
The four primary types of financial statements include the income statement, the
statement of changes in owners' equity, the statement of cash flows, and the -
ANSWERBalance sheet.
The income statement provides a detailed explanation of the results of the
organization's operations. Net income is found on the income statement as well as
the - ANSWERStatement of changes in shareholders' equity.
Which one of the following is a major purpose of the statement of cash flows? -
ANSWERIt is used to assess an organization's need for additional financing.
Which one of the following statements is correct regarding underwriter and producer
relationships? - ANSWERFamiliarity allows an individual to understand the other
party's intentions, expectations, and motivations.
, Which one of the following accounting principles may cause a limitation in the use of
financial statements to evaluate an organization? - ANSWERThe cost principle
The balance sheet provides a snapshot of an organization's financial condition -
ANSWERAt a given point in time.
The report of management is a report to the users of financial statements, required
as part of the company annual report. Which one of the following is true regarding
this report? - ANSWERThe chairman of the board signs it acknowledging the
integrity of the report.
Why are qualitative assets of an organization, such as management and productivity,
so hard to quantify? - ANSWERIt is extremely difficult to measure these qualitative
assets.
How is the value of an insurer's reputation typically reflected on its balance sheet? -
ANSWERNot recorded
The four primary types of financial statements include the balance sheet, the income
statement, the statement of cash flows, and the - ANSWERStatement of changes in
owners' equity.
Gross profit is reported on the income statement. How is gross profit calculated? -
ANSWERGross profit = sales - cost of goods sold
Which of the following best describes the result of the four major financial statements
all taken together? - ANSWERThe financial condition of the organization.
Home Housewares Inc. is a retail store applying for commercial coverage with ABC
Insurance. The underwriter requested a copy of Home Houseware's most recent
financial statements. The underwriter will use the balance sheet to determine -
ANSWERHome Houseware's financial position as of the balance sheet date.
Ace Woodworking Company makes household furniture. Which one of the following
best describes an expense that should be classified as an operating expense on
Ace's income statement? - ANSWERUtility charges for the manufacturing plant
The U.S. Securities and Exchange Commission (SEC) requires a publicly traded
company to keep its shareholders informed. Which one of the following is the most
likely way that companies meet this requirement? - ANSWERThe company annual
financial report
Which one of the following groups of financial statements, when considered together,
would best present an organization's financial condition? - ANSWERThe balance
sheet, the income statement, the statement of change in shareholders' equity, and
the statement of cash flow.
