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Delta Enterprises issues loan notes of $100,000 on 1 January 2008. Redemption is to take place...

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Accounting

Delta Enterprises issues loan notes of $100,000 on 1 January 2008. Redemption is to take place on equal terms, five years later. The company decides to put aside an equal amount to be invested at 6% which will provide $100,000 on maturity. Tables show that $0.177274 invested annually will produce $1 in five years’ time.

Required:

  1. Prepare the loan-note redemption reserve account.
  2. Set up the loan-note sinking fund investment account.
  3. Calculate the annual investment required.
  4. Show the impact on the balance sheet each year.

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