Mutual Property Insurance Company Has a Surplus of $2 Million

question 31

Multiple Choice

Mutual Property Insurance Company has a surplus of $2 million.According to a conservative rule,how much in new net premiums can Mutual Property Insurance Company safely write?

• A)$2 million
• B)$8 million
• C)$10 million
• D)$20 million

---

Definitions:

Percentage-of-Completion Method

An accounting method used to recognize revenues and expenses of long-term projects proportionately with the degree of completion.

IFRS

A collection of accounting standards known as International Financial Reporting Standards, developed by the International Accounting Standards Board, which directs the global preparation of financial statements.

Selling Goods

The act of transferring physical products or merchandise to a buyer in exchange for money or other compensation.

Cookie Jar Reserves

An accounting practice where companies store reserves in good years to smooth out earnings by releasing them in bad years, which can be seen as deceptive.