Chi Enterprises issues loan notes of £105,000 on 1 January 2047. Redemption is to take place on equal terms, six years later. The company decides to put aside an equal amount to be invested at 5% which will provide £105,000 on maturity. Tables show that £0.161082 invested annually will produce £1 in six years’ time.

Required:

1. Calculate the annual sinking fund investment.
2. Record the journal entries for the investment each year.
3. Prepare the loan-notes ledger account.
4. Show the effect on the equity section of the balance sheet.