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 RMU 9TH EDITION
- Gregorio Corp. purchased a P5,000,000 ordinary life insurance policy on its president. Gregorio is the beneficiary under the policy. The policy year and Gregorio' accounting year coincide. Additional data available for the year ended December 31, 2023 are as follows: Cash surrender value, January 1 Cash surrender value, December 31 Annual advance premium paid January 1 Dividend received on July 1 What amount should be reported as life insurance expense for 2023? P228,000 290,000 120,000 15,000arrow_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_forwardSeveral 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_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_forwardTirad Pass Co. 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 P100,000 and the policy is dated January 1, 2021. The cash surrender values are: December 31, 2023 December 31, 2024 1 100,000 180,000 The entity follows the calendar year as its fiscal period. The president died on July 1, 2024 and the policy is settled on December 31, 2024. 1. What amount should Tirad Pass Co. report as gain on life insurance settlement in its 2024 profit or loss? 2. What amount should Tirad Pass Co. report as life insurance expense for 2024?arrow_forwardIn 20x0, Chain, Inc. purchased a P1,000,000 life insurance policy on its president, of which Chain is the beneficiary. Information regarding the policy for the year ended December 31, 20x5 follows: Cash surrender value, 1/1/x5 - 87,000 Cash surrender value, 12/31/x5 - 108,000 Annual Avance Premium Paid 1/1/x5 - 40,000 During 20x5, dividends of P6,000 were applied to increase the cash surrender value of the policy. What amount should Chain report as life insurance expense for 20x5? Answer:arrow_forward
- The 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_forwardOn Jan. 1, 2010, ABC entered into an insurance contract coveringthe life of its founder. The P100,000 annual insurance premium ispayable at the start of the year. By the end of the fifth year, theinsurance will have a cash surrender value and it was as follows forthe following years:Year Cash Surrender Value2014 P80,0002015 100,0002016 130,0002017 180,000 1. What is the journal entry on Dec. 31, 2014 to recognized thecash surrender value and adjust the related accounts?Parenthetical solutions would suffice. 2. If the founder died on Mar 31, 2017, what is the journalentry to update the cash surrender value on the said date? 3. Continuing from the previous number and assuming furtherthat P3,000,000 was received from the insurance, what isthe journal entry to record the gain on settlement and makethe final adjustment to the insurance expense?arrow_forwardOn Jan. 1, 2010, ABC entered into an insurance contract coveringthe life of its founder. The P100,000 annual insurance premium ispayable at the start of the year. By the end of the fifth year, theinsurance will have a cash surrender value and it was as follows forthe following years: Year Cash Surrender Value2014 P80,0002015 100,0002016 130,0002017 180,000 A. What is the journal entry on Dec. 31, 2014 to recognized thecash surrender value and adjust the related accounts?Parenthetical solutions would suffice. B. If the founder died on Mar 31, 2017, what is the journalentry to update the cash surrender value on the said date? C. Continuing from the previous number and assuming furtherthat P3,000,000 was received from the insurance, what isthe journal entry to record the gain on settlement and makethe final adjustment to the insurance expense?arrow_forward
- JJJ 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_forwardEmilio Co. insured the life of its president for P8,000,000, the entity being the beneficiary of an ordinary life insurance policy. The annual premium is P500,000 and the policy is dated January 1, 2021. The cash surrender values are: December 31, 2023 December 31, 2024 P450,000 570,000 The entity follows the calendar year as its fiscal period. The president died on October 1, 2024 and the policy is settled on December 31, 2024. 1. What amount should Emilio Co. report as gain on life insurance settlement in its 2024 profit or loss? 2. What amount should Emilio Co. report as life insurance expense for 2024?arrow_forwardOn Jan. 1, 2010, ABC entered into an insurance contract coveringthe life of its founder. The P100,000 annual insurance premium ispayable at the start of the year. By the end of the fifth year, theinsurance will have a cash surrender value and it was as follows forthe following years: Year Cash Surrender Value2014 P80,0002015 100,0002016 130,0002017 180,000 a.) What is the journal entry on Dec. 31, 2014, to recognize thecash surrender value and adjust the related accounts?Parenthetical solutions would suffice. b )If the founder died on Mar 31, 2017, what is the journalentry to update the cash surrender value on the said date? c.) Continuing from the previous number and assuming furtherthat P3,000,000 was received from the insurance, what isthe journal entry to record the gain on settlement and makethe final adjustment to the insurance expense?arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning