Hug Company insured the life of the president for P2,000,000, the entity being named as the beneficiary.

The annual premium is P60,000. The policy was dated January 1, 2015 and carried the following cash

surrender value:

End of policy year Cash surrender value

December 31, 2015 -

December 31, 2016 -

December 31, 2017 60,000

December 31, 2018 84,000

December 31, 2019 116,000

December 31, 2020 156,000

The entity followed the calendar year as the accounting period. The president died on July 1, 2020 and the

face of the policy was collected in July 31, 2020.

(The entity is applying the asset method of recording prepayments.)

REQUIRED: (10 points)

1. Compute the life insurance expense in 2016, 2017, 2019, and 2020. (4 points)

2. Compute the cash surrender value as of:

a. December 31, 2017; (1 point)

b. December 31, 2019; and (1 point)

c. July 1, 2020. (1 point)

3. Give the journal entry on December 31, 2017. (1 point)

4. Give the journal entry on July 31, 2020. (2 points)