On January 1, 20X1, PAR purchases $100,000 par value, 12 percent
coupon rate (i.e., stated rate), 10-year bonds from ROM for
$90,000. Interest on the bonds is payable on January 1 and July 1.
The interest expense recognized by ROM and the interest income
recognized by PAR each year include straight-line amortization of
the discount. (For simplicity, we do not use the effective interest
method. But the logic is the same.)
When are bonds issued at discount?
a.
When market...