Final answer:
A bond discount should be presented as a contra liability on an issuer's balance sheet and reflects bonds issued below their face value due to market interest rates exceeding the bond's coupon rate.
Step-by-step explanation:
A bond discount should be presented in the financial statements of the issuer as a contra liability account, which means it is subtracted from the face value of the bond to reflect the net carrying amount of the debt on the balance sheet. When a bond is issued at a discount, it means that the market interest rates are higher than the bond's coupon rate, causing the bond to sell for less than its face value. Over the life of the bond, this discount is amortized to interest expense, gradually aligning the book value of the bond with its principal amount due at maturity.