Reference no: EM133178284
Problem 1 - Several years ago. Iris Company purchased a P3,000,000 ordinary life insurance policy on its president and the company is the named beneficiary. Additional data are available for the year ended December 31, 2020.
Cash surrender value of life insurance, December 31, 2020 - P117,000
Annual premium paid in advance on January 1, 2020 - P50,000
Life insurance expense recognized in the statement of comprehensive income for the year ended December 31, 2020 - P38,000
How much must have been the cash surrender value of life insurance at Iris's December 31, 2020 financial statements?
a. P 12,000
b. P117,000
c. P129,000
d. P105,000
Problem 2 - On January 1, 2016, Pep 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 is as follows:
Cash surrender value
2016 - 0
2017 - 0
2018 - 36,000
2019 - 49,000
2020 - 62,000
The president died on October 1, 2020. Pep Company's accounting year is the calendar year.
How much is the life insurance expense for the year ended December 31, 2020?
a. P120,000
b. P107,000
c. P90,000
d. P80,250
Problem 3 - On January 1, 2020, Falcon Corporation issued P10,000,000 bonds that will mature in 5 years. The management decided to set up a separate fund for the retirement of these bonds. The fund is to be placed in a separate account to be maintained in the company's depository bank.
In a board resolution, it was decided that deposits of equal amounts will be made every June 30 and December 31, starting June 30, 2020 up to December 31, 2024. The company expects to earn an average interest of 10%, net of tax, on this investment.
How much is the required semi-annual deposit that will accumulate P10,000,000 at the end of five years?
a. P1,637,975
b. P1,295,052
c. P1,000,000
d. P 795,045
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