Rho Corporation issues loan notes of $90,000 on 1 January 2065. 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 $90,000 on maturity. Tables show that $0.185093 invested annually will produce $1 in five 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.