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Iota Ltd issues loan notes of €75,000 on 1 January 2035. Redemption is to take place...

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Accounting

Iota Ltd issues loan notes of €75,000 on 1 January 2035. Redemption is to take place on equal terms, four years later. The company decides to put aside an equal amount to be invested at 5% which will provide €75,000 on maturity. Tables show that €0.232012 invested annually will produce €1 in four years’ time.

Required: Prepare the following entries:

  1. Loan-note redemption reserve account.
  2. Sinking fund investment account.
  3. Loan-notes account.
  4. Extract from the cash flow statement showing annual investment.

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