The use of a Purchase Discounts Lost account implies that the recorded cost of a purchased inventory item is its
A) invoice price.
B) invoice price plus the purchase discount lost.
C) invoice price less the purchase discount taken.
D) invoice price less the purchase discount allowable whether taken or not.

Question

Quizplus · Accepted Answer

The Purchase Discounts Lost account is used when a purchaser fails to take advantage of a discount, which is a reduction in the invoice price if paid within a certain timeframe. Therefore, the recorded cost of the purchased inventory item is the invoice price less the purchase discount allowable whether taken or not, as this is the amount that the purchaser should have paid if they had taken the discount.

The Use of a Purchase Discounts Lost Account Implies That