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.

Question

Quizplus · Accepted Answer

Purchase discounts taken should be deducted from the acquisition cost of the inventory to reflect the actual cost of the inventory purchased. This is in accordance with the lower of cost or market principle in accounting. The other options are incorrect.

Concerning Purchase Discounts, Which One of the Following Statements Is