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Gamma Inc issues loan notes of €70,000 on 1 January 2007. Redemption is to take place...

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Accounting

Gamma Inc issues loan notes of €70,000 on 1 January 2007. Redemption is to take place on equal terms, six years later. The company decides to put aside an equal amount to be invested at 5% which will provide €70,000 on maturity. Tables show that €0.161082 invested annually will produce €1 in six years’ time.

Required:

  1. Annual sinking fund deposit
  2. Yearly investment balance
  3. Schedule of the loan-note redemption
  4. Impact on the equity section of the balance sheet

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