Purchase discounts should be reported as a(n):
A) Deduction from the purchase cost of the goods.
B) Adjustment in full to the ending inventory amount.
C) Contra inventory account.
D) Adjustment in full to cost of goods sold.

Question

Quizplus · Accepted Answer

Purchase discounts should be reported as a deduction from the purchase cost of the goods because they represent a reduction in the cost of the items purchased. This is reflected in the calculation of Cost of Goods Sold by deducting the purchase discounts from the total cost of inventory purchased. Reporting purchase discounts as a contra inventory account or as an adjustment to ending inventory amount would not accurately reflect the reduction in cost of the goods sold.

Purchase Discounts Should Be Reported as A(n)