An Important Distinction Between Valid Insurance Contracts and Wagering Contracts

question 47

Multiple Choice

An important distinction between valid insurance contracts and wagering contracts is that:

• A) insurance contracts create a new risk that did not previously exist, while wagering contracts don't.
• B) wagering contracts are not contrary to public policy, while insurance contracts are.
• C) insurance contracts transfer existing risks, while wagering contracts create new ones.
• D) unlike insurance contracts, wagering contracts are indemnity contracts.

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Definitions:

Job-Order Costing

An accounting system that accumulates costs according to individual jobs rather than processes or time periods.

Process Costing

A costing method used for homogeneous products, where costs are accumulated for a continuous process and then assigned to units of output.

Weighted-Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all similar items in inventory.

Equivalent Units of Production

A concept in cost accounting used to allocate production costs to units produced, accounting for partially completed units by converting them into an equivalent number of fully completed units.