Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value. The present value of an amount is calculated by using the following formula: Present value of an amount = Future value ( 1 + interest rate ) number of periods To determine: The amount that Company R should pay for the investment to earn 8% rate of return .

Question

Want to see the full answer?

Answer 1

Question

Chapter AG, Problem G.11BE

To determine

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value. The present value of an amount is calculated by using the following formula:

Present value of an amount = Future value(1 + interest rate)number of periods

To determine: The amount that Company R should pay for the investment to earn 8% rate of return.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Additional information(a) All contributions received by the plan were paid by Flagstaff Ltd.(b) The interest rate used to measure the present value of the defined benefitobligation was 9% at 31 December 2019 and 31 December 2020.(c) The asset ceiling was nil at 31 December 2019 and 31 December 2020. Calculate the actuarial gain or loss for the defined benefit obligation for 2020 Calculate the return on plan assets, excluding any amount recognized in net interest for2020

Additional information(a) All contributions received by the plan were paid by Flagstaff Ltd.(b) The interest rate used to measure the present value of the defined benefitobligation was 9% at 31 December 2019 and 31 December 2020.(c) The asset ceiling was nil at 31 December 2019 and 31 December 2020. Questiona) Determine the surplus or deficit of Flagstaff Ltd.’s defined benefit plan at 31 December2020 and determine the net defined benefit asset or liability that should be recognized by FlagstaffLtd at 31 December 2020 b) Calculate the net interest for 2020

Rentokil Limited issued a 10-year bond on January 1 2011. It pays interest on January1. The below amortization schedule and interest schedule reflects this. Its year end isDecember 31. a) Indicate whether the bonds were issued at a premium or a discount and explainhow you came to your decision and Compute the stated interest rate and the effective interest rate c) Prepare the journal entries for the following years:I. 2011, 2012 & 2018