Discounts – Current Liabilities

Suppliers frequently offer discounts for early payment and the discount rates are usually high enough to induce customers to pay promptly. If the buyer intends to pay within the discount period, then the inventory is usually recorded at its cost, net of the discount. In the preceding example, if the supplier offered a 2% discount for early payment and the purchaser intends to pay within the discount period, then the inventory would be recorded initially at a cost of $98,000 ($100,000 invoice price, minus a $2,000 discount).

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