Tayna Inc. insured the life of the president $2,000,000, the entity being the beneficiary of an ordinary life policy. The annual premium is $60,000. The policy was dated January 1, 2020 and carried the following cash surrender value:

End of policy year            Cash surrender value

    2020                                              -

    2021                                    -

2022                               60,000

2023                               84,000

2024                                 116,000

The entity followed the calendar year as the accounting period. The president died on June 30, 2024 and the policy was collected on July 31, 2024.

a. For the year 2024, what amount should be recognized as interest expense? 

b. What amount should Tayna Inc. recognize as gain on insurance settlement? 

Swift Corporation has a $5,000,000 ordinary life insurance policy on the president. The policy year and accounting year coincide. The entity provided the following data for the year ended December 31, 2020:

Cash surrender value, January 1 - 245,000

Cash surrender value, December 31 - 270,000

Annual advance premium paid, January 1 - 100,000

Dividend received, July 1 - 15,000

The entity is the beneficiary under the life insurance policy. The insured died on January 2, 2021, after the payment of annual premium of $100,000 on January 1, 2021.

 What amount should Swift Corporation recognize as gain on insurance settlement? 

Answer rating: 100% (QA)

a To calculate the interest expense for the year 2024 we need to determine the interest component of ... View the full answer