Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 8 - Valuation of Inventories: A Cost-Basis Approach - Concepts for Analysis - Instructions - Page 485: CA8-4a

Answer

Cash discounts should not be classified as financial income when payments are executed.

Work Step by Step

Only when the company has sold the inventory should the income be received. Moreover, for appropriate matching of discount to the respective purchase, the discount can only be recognized when the purchase has been successfully completed no when payment has been rendered.
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