If a company records a purchase at the net cost and then fails to take advantage of the discount,the discount not taken is recorded in the Interest Expense account.

Question

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If a company fails to take advantage of a discount, the discount not taken is not recorded as interest expense. It is recorded as a reduction in the cost of goods purchased or in a separate account called "purchase discounts forfeited." Interest expense is related to the cost of borrowing money, not to discounts on purchases.

If a Company Records a Purchase at the Net Cost