1.
Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.
Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
- Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
To Journalize: The insurance expense and increased investment, assuming the cash surrender value of policy increased the value from $2,500 to $4,600 in 2018.
2.
To Journalize: The disbursement of the insurance amount on the demise of the CEO of Company PC.
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Intermediate Accounting
- Several years ago. PEPA Company purchased a P3,000,000 ordinary life insurance policy on its president and the company is the named beneficiary. Additional data are available for the year ended December 31, 2020.Cash surrender value of life insurance, December 31, 2020 - P117,000 Annual premium paid in advance on January 1, 2020 - P50,000 Life insurance expense recognized in the statement of comprehensive income for the year ended December 31, 2020 - P38,000How much must have been the cash surrender value of life insurance at PEPA's December 31. 2020 financial statements? a. P 12,000 b. P117,000 c. P129,000 d. P105,000arrow_forwardOn Jan. 1, 2010, ABC entered into an insurance contract covering the life of its founder. The P100,000 annual insurance premium is payable at the start of the year. By the end of the fifth year, the insurance will have a cash surrender value and it was as follows for the following years:Year Cash Surrender Value2014 P80,0002015 100,0002016 130,0002017 180,000 What is the journal entry on Dec. 31, 2014 to recognized the cash surrender value and adjust the related accounts? Parenthetical solutions would suffice.arrow_forwardHunter Corporation pays an annual insurance premium of $8,500 to cover the lives of its board officers. According to the terms of the insurance contract, the cash surrender value of the policies increase from $10,000 to $11,500 during that year. The adjusting entry that Hunter would record at the end of the year to increase the cash surrender value would include a credit to Insurance Expense for $8,500. debit to Prepaid Insurance for $8,500. debit to Cash Surrender Value of Life Insurance for $1,500. credit to Cash for $1,500.arrow_forward
- Several years ago. Iris Company purchased a P3,000,000 ordinary life insurance policy on its president and the company is the named beneficiary. Additional data are available for the year ended December 31, 2020.Cash surrender value of life insurance, December 31, 2020 - 117,000 Annual premium paid in advance on January 1, 2020 - 50,000 Life insurance expense recognized in the statement of comprehensive income for the year ended December 31, 2020 - 38,000How much must have been the cash surrender value of life insurance at Iris's December 31. 2020 financial statements? A.12,000 B. 117,000 C. 129,000 D. 105,000arrow_forwardChain Co purchased 1M life insurance policy on its president, of which Chain is the beneficiary. Information regarding the policy for the year ended December 31, 2011 follows:Cash surrender value, January 1 87,000Cash surrender value, December 1 108,000Annual advance premium paid January 1 40,000 What amount should Chain report as life insurance expense for 2011?arrow_forwardJJJ Company insured the life of its president for P2,000,000. The entity being the beneficiary of an ordinary life insurance policy. The annual premium is P80,000 and the policy is dated January 1, 2016. The cash surrender values are P15,000 on December 31, 2018 and P19,000 on December 31, 2019. The entity followed the calendar year as the fiscal period. The president died on October 1, 2019 and the policy is settled on December 31, 2019. What is the gain on life insurance settlement for 2019?arrow_forward
- In 2015, Maine Corporation bought a $5,000,000 life insurance policy on its president, of which Maine Corporation is the beneficiary. Information regarding the policy for the year ended December 31,2020 follows: Cash surrender value, 1/1/2020 : $435,000 Cash surrender value, 12/31/2020 : $540,000 Annual advance premium paid 1/1/2020 : $200,000 During 2020, dividends of $30,000 were applied to increase the cash surrender value of the policy. How much should be the life insurance expense for 2020?arrow_forwardThe balance of the cash surrender value of life insurance policy maintained on the life of the president increased from P80,000 to P115,000 during the year. The company pays an annual insurance premium of P110,000 on this policy. Assume that the company has the sole right to cancel this policy, life insurance expense for the year is a. P145,000 b. P80,000 c. P75,000 d. P110,000arrow_forwardAt May 31, 20x1, Quay owned a P10,000 whole-life insurance policy with cash surrender value of P4,500. The cash surrender value is used as a collateral security for an outstanding loan of P2,500. In Quay's May 31, 20x1 statement of financial position, what amount should be reported as investment in life insurance? Answer:arrow_forward
- Silver Company purchased a 2,000,000 ordinary life insurance policy on its president and the company is the named beneficiary. Additional data are available for the year ended December 31, 2020.Cash surrender value: January 1 - 87,000; December 31 - 108,000 Annual premium paid in advance on January 1 - 40,000 Dividend received on July 1 - 6,000How much is Silver Company’s life insurance expense for 2020? A. 40,000 B. 34000 C. 19,000 D. 13,000arrow_forwardABC Company insured the life of one of its officers. Yearly premium amount to P 75,000. At the end of 2020, cash surrender value of the policies totaled P 200,000. Dividends received by ABC from the insurance company amounted to P 10,000 in 2020. The insurance expense recognized by ABC in 2020 was P 45,000. How much was the cash surrender value of life insurance at the beginning of the year? a. P 230,000 b. P 180,000 c. P 220,000 d. P 170,000arrow_forwardThe balance of the cash surrender value of life insurance policy maintained on the life of the president decreased from 115,000 to 80,000 during the year. The company pays an annual insurance premium of P110,000 on this policy. Assume that the company has the sole right to cancel this policy, life insurance expense for the year isarrow_forward
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