A discount on bonds payable arises when a corporation issues bonds with an issue price less than par value.

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A discount on bonds payable occurs when bonds are issued at a price lower than their par value. This results in the bondholders receiving lower interest payments than they would if the bonds were issued at par. The discount reflects the difference between the amount the bondholders will receive at maturity and the amount of the bond's par value.

A Discount on Bonds Payable Arises When a Corporation Issues