Edible Chemicals Corporation owns a $4 million whole life insurance policy on the life of its CEO, naming Edible Chemicals as beneficiary. The annual premiums are $70,000 and are payable at the beginning of each year. The cash surrender value of the policy was $21,000 at the beginning of 2011.
Required:
1. Prepare the appropriate 2011 journal entry to record insurance expense and the increase in the investment assuming the cash surrender value of the policy increased according to the contract to $27,000.
2. The CEO died at the end of 2011. Prepare the appropriate journal entry.