Asked by Yesenia Zacharkiw on Apr 27, 2024
Verified
Concerning purchase discounts, which one of the following statements is true?
A) Purchase discounts taken should be deducted from the acquisition cost of the inventory.
B) The net price method results in recording accounts payable at the maximum value of the liability that the company may be required to pay out.
C) Purchase discounts lost should be included in the cost of inventory.
D) An advantage of the gross price method is that it isolates purchase discounts lost and thus highlights inefficiencies.
Purchase Discounts
A deduction from the stated price of goods or services allowed by the seller to the buyer for prompt payment.
Acquisition Cost
The total cost incurred to acquire an asset, including purchase price and all expenses directly tied to the acquisition.
Net Price Method
An accounting approach that calculates the cost of goods sold or purchased after deducting any discounts, rebates, or allowances from the gross price.
- Implement the principles of purchase discounts, returns, and allowances within the framework of inventory accounting.
Verified Answer
Learning Objectives
- Implement the principles of purchase discounts, returns, and allowances within the framework of inventory accounting.
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