question archive Answer true or false: 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
Answer true or false: 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
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Answer true or false:
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.
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The statement is false.
In the net cost method, purchases are booked at a purchase invoice cost less purchase discount assuming the company will pay within the discount period. If it fails to honor within the discount period, it will debit "purchase discount lost" with the foregone purchase discount amount not in the interest expense account.
