LaBelle Corporation owns a $5.0 million whole life insurance policy on the life
ID: 2554001 • Letter: L
Question
LaBelle Corporation owns a $5.0 million whole life insurance policy on the life of its CEO, naming LaBelle as beneficiary. The annual premiums are $94,000 and are payable at the beginning of each year. The cash surrender value of the policy was $54,000 at the beginning of 2018 Required 1. Prepare the appropriate 2018 journal entry to record insurance expense and the increase in the investment, assuming the cash surrender value of the policy increased according to the contract to $69,000 2. The CEO died at the end of 2018. Prepare the appropriate journal entry. Complete this question by entering your answers in the tabs below Required 1 Required 2 Prepare the appropriate 2018 journal entry to record insurance expense and the increase in the investment, assuming the cash surrender value of the policy increased according to the contract to $69,700. (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, not millions.) Show lessA View transaction list Journal entry worksheet Record the entry for insurance expenses and the increase in the investment.Explanation / Answer
Solution:
PLEASE NOTE IN THE QUESTION YOU HAVE PROVIDED TWO FIGURES:
--Prepare the appropriate 2018 journal entries to record insurance expense and the increase in the investment assuming the cash surrender value of the policy increased according to the contract to $69,000
-- Prepare the appropriate 2018 journal entries to record insurance expense and the increase in the investment assuming the cash surrender value of the policy increased according to the contract to $69,700
I am answering with figure $69,000
Journal entries
Debit
Credit
Insurance expense
79,000
Cash surrender value of life insurance
15,000
Cash
94,000
(69,000 - 54,000 = 15,000)
Cash
5,000,000
Cash surrender value of life insurance
69,000
Gain on life insurance settlement
4,931,000
Debit
Credit
Insurance expense
79,000
Cash surrender value of life insurance
15,000
Cash
94,000
(69,000 - 54,000 = 15,000)
Cash
5,000,000
Cash surrender value of life insurance
69,000
Gain on life insurance settlement
4,931,000
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