Life Insurance Policy owned by Company Accounting Treatment?

[kosie88]

Hi! I'm trying to understand what journal entries are required for the following scenario

Company A has bought a life insurance policy from their bank for one of their key employee for USD 1 million.
The main purpose of this is to start a credit line relationship with their bank by giving buying such insurance policy.

1. There is a downpayment for the insurance premium of USD 200,000 paid by Company A, which is debited from their bank account
2. The balance of USD 800,000 is covered by the bank with a term loan issued by the same bank for Company A.
3. Please see the attached file for the policy schedule - guaranteed cash value rates, Cash value of insurance starts at USD 900,000
4. Company A now has a credit line worth USD 800,000 which has been fully utilized due to the payment of insurance premiums.

I'm not sure what accounting entries are required for the above situation, can anyone please kindly give me some tips / check if i'm missing any entries from below?

First of all, I think I should have new balance sheet accounts

• Asset - Life Insurance
• Liability - Term Loan USD800,000

What kind of income statement accounts do I need to create, insurance premium expenses account?

Below Journal Entry to recognize incidents 1 & 2 above
Dr. Asset - Life Insurance USD 1,000,000
Cr. Bank Account USD 200,000
Cr. Liability - Term Loan USD 800,000


Then i'm stuck......pretty sure it is incomplete... Looking for wisdoms from everyone! Thanks so much!