"There is considerable diversity of opinion as regards the proper treatment of discount on securities sold. There is a distinction between bonds, representing corporate indebtedness and having a definite limitation as to the time of their redemption, and share capital, representing ownership and which as a rule is irredeemable. In relation to the former there can be but one tenable view. If a company can market its 50-year 4 per cent. bonds at 90 per cent. of par, it means that the company's credit is on a 4½ per cent. basis; that it could market a like security paying 4½ per cent. at par. If it elects to issue at the lower rate it is merely sacrificing principal for the sake of a reduction in the annual interest charge; in other words, it is pre-paying interest which would accrue during the life of the issue. If $10,000,000 par value were issued at 90 per cent., the discount would amount to $1,000,000, and the saving in interest to $50,000 per year, or $2,500,000 in 50 years. Obviously the company cannot claim the privilege of capitalizing the discount, while thereby availing itself of the reduction in interest. If such a course were legitimate in the case of a 5 or 10 per cent. discount, it would be equally so if the discount were 50 or 75 per cent., when the absurdity of the proposition would be perfectly apparent. The somewhat general practice of prorating the discount, as a charge against revenues, over the term of the obligation's existence is sound; but this should be done, not in equal installments, but on the basis of the appreciated value of the bond as it approaches par at maturity. There is no apparent objection to charging discount of this nature in a lump sum against an accumulated surplus. The capitalization of discount on stocks, involving as it does the introduction of fictitious values in capital assets, is wholly indefensible." The writer has failed to note any particular "judicial determination" which approves of the charge of any such item to capital account. "(2) The interest during construction (3 per cent.) is less than a fair and reasonable return on the investment."