A bond discount or a bond premium results from a variance in the effective interest rate and the coupon rate of the bond. A premium happens when the effective interest rate is lower than the coupon rate and a discount takes place when the effective interest rate is higher than the coupon rate of the bond. Essentially, showing a bond discount means that the bond was sold for less than its face ...
This solution discusses the difference between a bond discount and a bond premium. The proper reporting method for the balance sheet and the income statement in relation to a bond discount and a bond premium is also discussed.