Kappa Corporation issues loan notes of $85,000 on 1 January 2059. Redemption is to take place...
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Kappa Corporation issues loan notes of $85,000 on 1 January 2059. Redemption is to take place on equal terms, five years later. The company decides to put aside an equal amount to be invested at 4% which will provide $85,000 on maturity. Tables show that $0.185093 invested annually will produce $1 in five years’ time.
Required: (a) Prepare the loan-note redemption reserve account. (b) Create the sinking fund investment account. (c) Set up the loan-notes account. (d) Provide extracts from the retained earnings and cash flow statement.
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