Bonds payable-callable. Hurley Co. has outstanding $30 million face amount of 15% bonds that were issued on January 1, 2001, for $29,250,000. The 20-year bonds mature on December 31, 2020, and are callable at 102 (that is, they can be paid off at any time by paying the bondholders 102% of the face amount).

Required:

a. Under what circumstances would Hurley Co. managers consider calling the bonds?

b. Assume that the bonds are called on December 31, 2013. Use the horizontal model (or write the journal entry) to show the effect of the retirement of the bonds.