Oldcity, Corp., has $1,750,000 of callable bonds payable outstanding, with a bond premium of $35,000 on May 31, 2012, immediately after an interest payment. Oldcity decides to retire the bonds when the call price is 105 and the market price is 103.

Requirements

1. What is Oldcity’s carrying amount of its callable bonds payable prior to the retirement?

2. Journalize Oldcity’s retirement of the bonds payable. No explanation is required.