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Beta Ltd issues loan notes of $40,000 on 1 January 2006. Redemption is to take place...

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Accounting

Beta Ltd issues loan notes of $40,000 on 1 January 2006. Redemption is to take place on equal terms, four years later. The company decides to put aside an equal amount to be invested at 3% which will provide $40,000 on maturity. Tables show that $0.265329 invested annually will produce $1 in four years’ time.

Required:

  • Journal entries for the annual sinking fund investment
  • T-accounts for loan-notes
  • Income statement impact for each year

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