On January 1, Jewel Company buys $200,000 of Marcelo Corp. 12%, 36-month notes. Interest is paid on the last day of each month. The notes are classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On December 31, the notes have a fair value of $204,000. The journal entry to record the receipt of the monthly interest on January 31 is:
A. Debit Cash $2,000; credit Interest Revenue $2,000.
B. Debit Cash $2,000; credit Debt Investments-AFS $2,000.
C. Debit Cash $2,000; credit Fair Value Adjustment-AFS (LT) $2,000.
D. Debit Cash $2,000; credit Fair Value Adjustment-AFS (ST) $2,000.
E. Debit Cash $24,000; credit Debt Investments-AFS $24,000.
Answer: A
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