Having not worked with balance sheets at my job before, I'm having trouble with some balance sheet concepts. Specifically, I have questions about two exam balance sheet problems:
Exam Fall 2014 question 9 b): The answer shows that we can set the surplus to 0 for this question since there are no gains/losses. Wouldn't there be some sort of surplus from assets needed for required capital? Why can we assume that its zero on the balance sheet?
Exam Fall 2014 5a)ii): I noticed that question 5a)ii) on the fall 2014 exam was on the balance sheet of an annual statement. I was surprised to see while there was a large reserve release, none of the surplus was released. I had always thought of surplus as just assets minus liabilities, but selling the asset didn't reduce the surplus. Can surplus only be released through dividends, otherwise it just stays on the balance as a "cash" asset? Also, if new business was issued, increasing the liabilities, would that reduce the surplus? Is there any other way that the surplus can be increased besides net income? If money was raised through selling equity or issuing debt for example, would we see an increase to the surplus on the balance sheet? How so?
Exam Fall 2014 question 9 b): The answer shows that we can set the surplus to 0 for this question since there are no gains/losses. Wouldn't there be some sort of surplus from assets needed for required capital? Why can we assume that its zero on the balance sheet?
Exam Fall 2014 5a)ii): I noticed that question 5a)ii) on the fall 2014 exam was on the balance sheet of an annual statement. I was surprised to see while there was a large reserve release, none of the surplus was released. I had always thought of surplus as just assets minus liabilities, but selling the asset didn't reduce the surplus. Can surplus only be released through dividends, otherwise it just stays on the balance as a "cash" asset? Also, if new business was issued, increasing the liabilities, would that reduce the surplus? Is there any other way that the surplus can be increased besides net income? If money was raised through selling equity or issuing debt for example, would we see an increase to the surplus on the balance sheet? How so?
Balance Sheet questions
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