Freshfood Corp. has $3,000,000 of convertible bonds payable outstanding, with a bond premium of $30,000 also on the books. The bondholders have notified Freshfood that they wish to convert the bonds into shares. Specifically, the bonds may be converted into 400,000 of Freshfood's common shares.
1. What is Freshfood's carrying amount of its convertible bonds payable prior to the conversion?
2. Journalize Freshfood's conversion of the bonds payable into common shares. No explanation is required.