In 2003, Chain, Inc. purchased a $1,000,000 life insurance policy on its president, of which Chain is the beneficiary. Information regarding the policy for the year ended December 31, 2006, follows:

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Cash surrender value, 1/1/06

$ 87,000

Cash surrender value, 12/31/06

108,000

Annual advance premium paid 1/1/06

40,000

During 2006, dividends of $6,000 were applied to increase the cash surrender value of the policy. What amount should Chain report as life insurance expense for 2006?

  1. $40,000
  2. $25,000
  3. $19,000
  4. $13,000