Omicron Enterprises issues loan notes of $95,000 on 1 January 2017. 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 $95,000 on maturity. Tables show that $0.185093 invested annually will produce $1 in five 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.

Show the effect on the equity section of the balance sheet.