Epsilon Ltd issues loan notes of €65,000 on 1 January 2077. Redemption is to take place...
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Epsilon Ltd issues loan notes of €65,000 on 1 January 2077. Redemption is to take place on equal terms, six years later. The company decides to put aside an equal amount to be invested at 4% which will provide €65,000 on maturity. Tables show that €0.161082 invested annually will produce €1 in six years’ time.
Required: (a) Record the necessary journal entries. (b) Prepare the ledger accounts for loan-notes, redemption reserve, and sinking fund investment. (c) Calculate the annual sinking fund deposit. (d) Show the impact on the company’s income statement and balance sheet.
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