Problem:
On August 1, 2007, Witten Co. acquired 200, $1,000, 9% bonds at 97 plus accrued interest. The bonds were dated May 1, 2007, and mature on April 30, 2013, with interest paid each October 31 and April 30. The bonds will be added to Witten's available-for-sale portfolio. The preferred entry to record the purchase of the bonds on August 1, 2007 is
a. Available-for-Sale Securities 198,500
Cash 198,500
b. Available-for-Sale Securities 194,000
Interest Receivable 4,500
Cash 198,500
c. Available-for-Sale Securities 194,000
Interest Revenue 4,500
Cash 198,500
d. Available-for-Sale Securities 200,000
Interest Revenue 4,500
Discount on Debt Securities 6,000
Cash 198,500