Elysse Company reported the following accounts under current assets in the December 31, 2015 statement of financial
Question:
Elysse Company reported the following accounts under current assets in the December 31, 2015 statement of financial position:
Cash surrender value 90,000
Less: Policy loan from insurance company 50,000 40,000
Dividend receivable from insurance company 2,000
The above accounts are the only ones in the statement of financial position which pertain to the insurance policy or the loan. Upon investigation, the following data are gathered:
a. The cash surrender value reported in the statement of financial position is for June 30, 2016. The cash surrender value was P80,000 on June 30, 2015.
b. On June 30, 2015, the entity paid the annual premium of P30,000 minus the dividend declared of P2,000.
c. The loan from the insurance company is a one-year note dated April 1, 2015. The 12% interest is payable on the date of maturity.
d. The dividend declared was recorded by debiting dividend receivable and crediting dividend income.
Requirement:
1. Prepare journal entries to correct the accounts on December 31, 2015.
2. Indicate the financial statement classification of the accounts related to the insurance policy and the loan.
Expert Answer:
