Which Is a Reason to Use the Net Method to Record

question 20

Multiple Choice

Which is a reason to use the net method to record purchase discounts?

• A)Cost-benefit factor is greater for the net method.
• B)Reporting "purchase discounts lost" signifies inefficient business practices.
• C)Given the materiality of the amounts involved,the net method is used.
• D)The net method is technically superior to the gross method.

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Definitions:

Forward Rate

The predetermined price for a transaction that will occur at a specific future date, used in the context of currency and interest rate markets.

Interest Rate Parity

A theory that suggests the difference in interest rates between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.

Nominal Rate

The interest rate before adjustments for inflation; essentially, the face value rate of interest.

Inflation

How fast the general price index for merchandise and services escalates, corroding the purchasing strength.