Discounts given for early payment of credit purchases of capital assets should be:

Question

Quizplus · Accepted Answer

Discounts given for early payment of credit purchases of capital assets should be deducted from the invoice price when determining the cost of the asset. This is because the discount represents a reduction in the cost of the asset, and should be reflected in the recorded cost to properly reflect the true value of the asset. It should not be recorded as interest expense or revenue, as it does not reflect an interest transaction. It cannot be capitalized as a cost of the asset, as it has already been reflected in the cost reduction.

Discounts Given for Early Payment of Credit Purchases of Capital