Contents:
- Preparation of Life Policy Account
- Preparation of Life Policy Account and Calculate Profit/Loss of the Insurance Holder
Problems on the Assignment of Life Insurance Policies
1. Preparation of Life Policy Account:
Mr. X makes an assignment to his creditors, Y & Co. against his debt of Rs. 5,000 (since he is unable to pay) on 1st Jan. 1985 of a life policy for Rs. 10,000 (without profit). The annual premium of the policy is payable on 31st December by Rs. 500. Y & Co. pays the first premium on 31st December 1984 (agreeing to pay the annual premium when it becomes due).
ADVERTISEMENTS:
The surrender value of the policy were as under:
X dies on 1st Jan. 1987 when the policy money Rs. 10,000 was paid.
Show the necessary Accounts in books of Y & Co.
2. Preparation of Life Policy Account and Calculate Profit/Loss of the Insurance Holder:
X assigned his life policy of Rs. 17,500 to Y in satisfaction of his indebtedness of Rs. 10,000. The assignment was made on 4th April 1983. The annual premium payable on 30th Dec. was Rs. 600.
On 1st Feb. 1986, X dies, the policy money having been paid on 28th Feb. 1986.
ADVERTISEMENTS:
The surrender values were:
Y prepares his accounts annually on 31st December. Assuming that Y desires to keep the policy alive and maintain it at its surrender value, show the Policy Account and X’s Account in his books along with the net profits/losses over the entire transactions.
