When Using a Perpetual Inventory System, Why Are Discounts Credited

question 181

Multiple Choice

When using a perpetual inventory system, why are discounts credited to Inventory?

• A)The discounts are debited to discount expense and thus the credit has to be made to merchandise inventory.
• B)The discounts reduce the cost of the inventory.
• C)The discounts are a reduction of business expenses.
• D)None of these answers choices are correct.

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Definitions:

Celler-Kefauver Act

Extended the government’s authority to control mergers.

Vertical Mergers

A type of merger between companies that operate at different stages of the production process for a specific finished product, enhancing efficiency or reducing costs.

Conglomerate Mergers

A type of merger where two or more companies in unrelated industries combine business operations to reduce risk and diversify their business interests.

Concentrated Industries

Industries in which a small number of companies hold a large market share, resulting in reduced competition.