Exercise 10-12 The following section is taken from Windsor, Inc.\'s balance shee

Question

Exercise 10-12 The following section is taken from Windsor, Inc.'s balance sheet at December 31, 2018. Current liabilities Interest payable $ 73,000 Long-term liabilities Bonds payable, 596, due January 1, 2021 1,460,000 Bond interest is payable annually on January 1. The bonds are callable on any interest date. Journalize the payment of the bond interest on January 1, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 Assume that on January 1, 2019, after paying interest, Windsor calls bonds having a face value of $676,500. The call price is 105. Record the redemption of the bonds (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1

Explanation / Answer

a) 1/1/2019 Interest payable 73000 Cash 73000 b) 1/1/2019 Bonds payable 676500 Loss on redemption of bonds 33825 Cash (676500*105%) 710325 c) 12/31/2019 Interest expense = (1460000-676500)*5% = 39175 Interest payable 39175

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