Which of the Following Best Describes the Proper Treatment of Cash

question 77

Multiple Choice

Which of the following best describes the proper treatment of cash discounts on acquired machinery?

• A) The historical cost of the machinery should be the invoice price;the discount should be ignored.
• B) The historical cost of the machinery should be the net-of-discount amount,regardless of whether the discount is actually taken.
• C) The historical cost of the machinery should be the net-of-discount amount only if the discount is actually taken.
• D) The historical cost of the machinery should be the invoice price plus the amount of the discount which is treated a interest capitalized on the purchase.

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Definitions:

Marginal Costs

The increase in total cost that arises from producing one additional unit of a good or service.

Marginal Benefits

The additional satisfaction or utility a consumer receives from consuming one more unit of a good or service.

Net Benefit

The total benefits of a decision or action minus the total costs associated with that decision or action.

Marginal Cost

The expense associated with manufacturing an extra unit of a product.