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:

Horizontal Analysis

A financial analysis technique that compares historical financial information over a series of reporting periods.

Comparative Financial Statements

Financial reports that present the financial position and results of operations for a business across two or more periods, facilitating analysis over time.

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets.

Inventory

The goods and materials a business holds for the purpose of resale or production.