In order to help induce Jill Gregory to remain as president of the Reed Company, in 2000 it promises to pay her (or her estate) $200,000 per year for the next 15 years—even if she leaves the company or dies. Reed wants to properly record this transaction as deferred compensation, but is unsure of how many years it should use to amortize this cost. Moreover, Reed also purchased a “whole life” life insurance policy for Jill, naming the company as the sole beneficiary. Reed wants to ascertain if it can offset the cash surrender value of the policy against the above deferred compensation liability.
It needs to be written out with steps 1-5 for accounting research
1. Identify the issue/s
2. Collect the Evidence
3. Analyze and evaluate alternatives
4. Develop Conclusion
5. Communicate results and document
