How is the gain from life insurance settlement

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Problem - On January 1, 20x1, DEF Company insured the life of its president for P4,000,000 with an annual premium of P120,000 payable in advance at the beginning of each year. The company is the designated beneficiary and has the right to cancel the policy at its own option.

The cash surrender value of the policy at the end of each policy year are as follows:

 

Cash surrender value

20x1

0

20x2

0

20x3

36,000

20x4

49,000

20x5

62,000

The president of DEF Company died on September 30, 20x5.

Required -

1. How much is the life insurance expense for the year ended December 31, 20x4?

2. How much is the life insurance expense for the year ended December 31, 20x5?

3. How is the gain from life insurance settlement upon death of the officer?

Reference no: EM133056274

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