Under GAAP, the Rules for Recording Contingent Gains and Contingent

question 110

Multiple Choice

Under GAAP, the rules for recording contingent gains and contingent losses say that, if they are probable and can be reasonably estimated:

• A) Both contingent gains and losses are recognized.
• B) Contingent losses are recognized, but contingent gains are not.
• C) Contingent gains are recognized, but contingent losses are not.
• D) Neither contingent gains or losses may be recognized.

Identify how insurance can redistribute risk and its impact on expected utility.

Understand the role of insurance premiums and how they relate to the concept of fair insurance.

Describe efficient allocation of risk and the principles of diversification and pooling in reducing risk.

Analyze how changes in insurance policy premiums affect demand and supply.

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Definitions:

Capital Goods

Long-lasting goods that are used in the production of other goods or services.

Bank Tellers

Individuals employed by banks to assist customers with routine transactions like withdrawing or depositing money, among other services.

ATMs Spread

The spread of ATMs refers to the increasing availability and distribution of Automated Teller Machines across different locations, making financial transactions more accessible.

Demand for Bank Tellers

The need or desire for the services provided by bank tellers, which can be influenced by factors like economic conditions and technological advancements.