Question

Edible Chemicals Corporation owns a $4 million whole life insurance policy on the life of its CEO naming Edible Chemicals as beneficiary. The annual premiums are $77,000 and are payable at the beginning of each year. The cash surrender value of the policy was $24,500 at the beginning of 2018 Required: 1. & 2. Prepare the appropriat 2018 journal entres to record Insurance expense and the increase in the investment assuming the cash surrender value of the policy increased according to the contract to $31,200. The CEO died at the end of 2018. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in whole dollars.)

Answer 1

Answer
SR.NO	Explanation	Debit	Credit
1	Insurance expense a/c	$          70,300
	cash surrender value of life insurance a/c (Note-1)	$            6,700
	To cash a/c		$          77,000
2	cash a/c	$     4,000,000
	To cash surrender value		$          31,200
	To gain on life insurance settlement		$     3,968,800
Note-1              Cash surrender value of life insurance = 31200 - 24500 = $6700
Note-2 (cash surrender value of life insurance = 31200 ending value- 24,500 beginning value)