PROBLEM

On January 1, 2020, Shell Inc. insures the life of its president for P2,000,000, the entity being the beneficiary of the ordinary life policy. The annual premium is P30,000. The policy is dated January 1, 2020 and carries the following cash surrender value:

End of the policy yearCash surrender value

2020-

2021-

202230,000

202342,000

202458,000

The entity follows the calendar year as its fiscal period. The president dies on June 30, 2024 and the policy is collected on July 31, 2024.

REQUIRED:

1. Prepare the entry for the preceding transaction

2. Based on the result of your audit, determine the following:

I. Unadjusted Life insurance expense in 2020

II. Unadjusted Life insurance expense in 2021

III. Adjusted Life insurance expense in 2022

IV. Cash surrender value in December 31, 2022

V. Life insurance expense in 2023

VI. Cash surrender value in December 31, 2023

VII. Life insurance expense in 2024

VIII. Gain on life insurance settlement in 2024