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AHM-520 Questions and Answers

Question # 1

This concept, which is an extension of the going-concern concept, holds that the value of an asset that a company reports in its accounting records should be the asset's historical cost, not its current market value. Although this concept offers objectivity and reliability, it may lack relevance, particularly for assets held for a long period of time.

From the following answer choices, choose the name of the accounting concept that matches the description.

Measuring-unit concept

Full-disclosure concept

Cost concept

Time-period concept

Question # 2

Kevin Olin applied for individual healthcare coverage from the Mercury health plan. Before issuing the policy, Mercury's underwriters attached a rider that excludes from coverage any loss that results from Mr. Olin's chronic knee problem. This information indicates that Mr. Olin's policy includes

a moral hazard rider

an essential plan rider

an impairment rider

an insurable interest rider

Question # 3

The accounting department of the Enterprise health plan adheres to the following policies:

Policy Aâ€”Report gains only after they actually occur
Policy Bâ€”Report losses immediately
Policy Câ€”Record expenses only when they are certain
Policy Dâ€”Record revenues only when they are certain

Of these Enterprise policies, the ones that are consistent with the accounting principle of conservatism are Policies

A, B, C, and D

A, B, and D only

A and B only

C and D only

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