Kappa Corporation issues loan notes of $60,000 on 1 January 2013. Redemption is to take place...
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Kappa Corporation issues loan notes of $60,000 on 1 January 2013. Redemption is to take place on equal terms, five years later. The company decides to put aside an equal amount to be invested at 3.5% which will provide $60,000 on maturity. Tables show that $0.183544 invested annually will produce $1 in five years’ time.
Required: (a) Set up the loan-note redemption reserve account. (b) Calculate and record the annual investment in the sinking fund. (c) Maintain the loan-notes payable account. (d) Draft a memo to the board explaining the impact on retained earnings.
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