Theta Ltd issues loan notes of €75,000 on 1 January 2080. Redemption is to take place on equal terms, five years later. The company decides to put aside an equal amount to be invested at 3.5% which will provide €75,000 on maturity. Tables show that €0.183544 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.
4. Show the effect on the equity section of the balance sheet.