Theta Industries issues loan notes of €55,000 on 1 January 2011. Redemption is to take place...
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Accounting
Theta Industries issues loan notes of €55,000 on 1 January 2011. Redemption is to take place on equal terms, four years later. The company decides to put aside an equal amount to be invested at 4% which will provide €55,000 on maturity. Tables show that €0.232012 invested annually will produce €1 in four years’ time.
Required: Write a narrative report detailing:
The annual investment required.
The accounting treatment for the sinking fund.
The implications for the company’s financial statements.
The steps taken each year to ensure compliance with the redemption plan.
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