Chapter 1 Problem 13-11
2007
April 1 Life insurance 60,000
Cash 60,000
Dec. 31 Prepaid life insurance (60,000 x 3/12) 15,000
Life insurance 15,000
2008
Jan. 1 Life insurance 15,000
Prepaid life insurance 15,000
April 1 Life insurance 60,000
Cash 60,000
Dec. 31 Prepaid life insurance 15,000
Life insurance 15,000
2009
Jan. 1 Life insurance 15,000
Prepaid life insurance 15,000
April 1 Life insurance 60,000
Cash 60,000
Dec. 31 Prepaid life insurance 15,000
Life insurance 15,000
2010
Jan. 1 Life insurance 15,000
Prepaid life insurance 15,000
April 1 Cash surrender value 60,000
Life insurance 5,000
Retained earnings 55,000
April 1, 2007 – December 31, 2009 (33/36 x 60,000) prior years 55,000
January 1, 2010 – April 1, 2010 (3/36 x 60,000) current period 5,000
Total 60,000
1 Life insurance 60,000
Cash 60,000
Dec. 31 Prepaid life insurance 15,000
Life insurance 15,000
31 Cash surrender value 18,000
Life insurance 18,000
Balance – April 1, 2011 84,000
Balance – April 1, 2010 60,000
Increase from April 1, 2010 to April 1, 2011 24,000
Increase from April 1, 2010 to December 31, 2010 (24,000 x 9/12) 18,000
2011
Jan. 1 Life insurance 15,000
Prepaid life insurance 15,000
April 1 Cash surrender value (18,000 x 3/12) 6,000
Life insurance 6,000
1 Life insurance 60,000
Cash 60,000
July 1 Cash surrender value 8,000
Life insurance 8,000
Balance – April 1, 2012 116,000
Balance – April 1, 2011 84,000
Increase from April 1, 2011 to April 1, 2012 32,000
Increase from April 1, 2010 to July 1, 2010 (32,000 x 3/12) 8,000
July 31 Cash 2,000,000
Cash surrender value 92,000
Life insurance (60,000 x 9/12) 45,000
Gain on life insurance settlement 1,863,000
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