Some years ago M plc had issued $£ 375,000$ of $10 \%$ loan notes $2012 / 2016$ at par. The terms of the issue allow the company the right to repurchase these loan notes for cancellation at or below par, with an option to redeem, at a premium of $1 \%$, on 30 September 2012. To exercise this option the company must give three months' notice, which it duly did on 30 June 2012, indicating its intention to redeem all the loan notes outstanding at 30 September 2012.

M plc had established a sinking fund designed to accumulate the sum of $£ 378,750$ by 30 September 2012 and had appropriated profits annually and invested these, together with the interest from such investments and the profits made on any realisations from time to time. A special No. 2 bank account was established specifically to deal with the receipts and payments relating to the loan notes and the sinking fund.

By 30 June 2012 annual contributions amounting to $£ 334,485$, together with the interest on the sinking fund investments of $£ 39,480$, had all been invested except for $£ 2,475$ which remained in the No. 2 bank account at that date.

The only investments sold, prior to 30 June 2012 , had cost $£ 144,915$ and realised $£ 147,243$. This was used to repurchase loan notes with a par value of $£ 150,000$.

Transactions occurring between 1 July and 30 September 2012 were:

(i) interest received on the sinking fund investments:
$$
\begin{array}{ll}
7 \text { July } & £ 1,756 \\
13 \text { September } & £ 1,455 \end{array}
$$
(ii) proceeds from the sale of investments:
$$
\begin{array}{ll}
2 \text { August } & £ 73,215 \text { (book value was } £ 69,322 \text { ) } \\
25 \text { September } & £ 160,238 \text { (remaining investments) }
\end{array}
$$
(iii) redemption of all the loan notes, on 30 September, with the exception of $£ 15,000$ held by B Limited. The company had received notice of a garnishee order.*
(iv) M plc deposited with the W Bank plc the sum of $£ 15,150$ on 30 September 2012.
You are to ignore loan-note interest and income tax.
You are required, from the information given above, to prepare the ledger accounts (including the No. 2 bank account) in the books of M plc for the period 30 June to 30 September 2012, showing the transfer of the final balances to the appropriate accounts.
Note - Garnishee order This order, issued by the court, instructs $\mathrm{M}$ plc not to release the money owing to $B$ Limited until directed by the court to do so.
(Chartered Institute of Management Accountants)