Discounts Available for Early Payment of Liabilities on Purchases of Capital

question 7

Multiple Choice

Discounts available for early payment of liabilities on purchases of capital assets should:

• A) be capitalized as a part of the cost of the asset, whether taken or not, and subsequently included as amortization expense.
• B) be recorded and reported as a contra account to the related liability account.
• C) not be capitalized as cost of the asset whether taken or not.
• D) be given no recognition until taken or until the discount period has expired: if not taken, the discounts should be added to the cost of the asset.

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Definitions:

Microfinance

A type of banking service provided to unemployed or low-income individuals or groups who have no other access to financial services.

Financial Services

Economic services provided by the finance industry, including banks, insurance companies, investment funds, and more.

Traditional Banking

Banking services provided by physical bank branches, including deposit taking, lending, and other financial services.

Definitive Stakeholder

A key individual or group with a significant interest in or influence over the outcome of a project or business endeavor.