16.4 Loan notes:
　　●A limited company can raise fund by issuing loan notes.
　　●A loan note is a document that is evidence of a debt.
　　●A person will buy a loan note for a set nominal value, e.g. 100. He will loan $100 to the company.
　　●The nominal value of a loan note will be repayable after a certain number of years.
　　●In the meantime, the loan-holder will receive an annual fixed amount of interest based on the nominal value.
　　●The interest incurred is included in “finance cost” in the income statement.
　　EX. A is an incorporated business which needs to raise funds to purchase plant and machinery. On 1 March 20x9, it issues $150,000 10% loan notes, redeemable in 10 years’ time. Interest is payable half yearly at the end of August and February. What accounting entries are required in the year ended December 31 20x9?
　　Solution:
　　1 March 20x9　　　　 Dr. Cash 150,000
　　Cr. 10% Loan notes 150,000
　　31 August 20x9 Dr. Finance cost　　　　　　　　7,500
　　Cr. Cash 150,000 x 10% x 6/12 = 7,500
　　31 December 20x9 Dr. Finance cost　　　　　　　　　　　　　 5,000
　　Cr. Interest accrual 150,000 x 10% x4/12 = 5,000