On January 1, Parson Freight Company issues 7%, 10-year bonds with a par value of $2,000,000. The bonds pay interest semiannually. The market rate of interest is 8% and the bond selling price was $1,864,097. The bond issuance should be recorded as:

Debit Cash $2,000,000; credit Bonds Payable $2,000,000.

Debit Cash $1,864,097; credit Bonds Payable $1,864,097.

Debit Cash $2,000,000; credit Bonds Payable $1,864,097; credit Discount on Bonds Payable $135,903.

Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000.

Debit Cash $1,864,097; debit Interest Expense $135,903; credit Bonds Payable $2,000,000.