A return decreases the cost of the inventory because it results in a decrease in the amount paid for the inventory. On the other hand, an allowance is a reduction in the cost of the inventory and therefore decreases the cost. Similarly, a discount reduces the cost of the inventory and also decreases the cost. Therefore, options A, B, and C are incorrect.

Solved

A Purchase

Question 32

Multiple Choice

A purchase:

A) allowance increases the cost of the inventory.
B) discount increases the cost of the inventory.
C) allowance has no effect on the cost of the inventory.
D) return decreases the cost of the inventory.

Correct Answer: