Question

All of the following are deducted from the purchase price of inventory in determining cost of goods sold except:

a) freight in
b) purchase allowances
c) purchase returns
d) purchase discounts

Answer 1

Freight in is added to the cost of inventory, not deducted, while purchase allowances, purchase returns, and purchase discounts are deducted from the purchase price of inventory when calculating cost of goods sold.

The correct answer is :b.

Step-by-step explanation:

The item that is not deducted from the purchase price of inventory when determining the cost of goods sold is: a) freight in. Freight in is an additional cost of acquiring the inventory and is therefore added to inventory cost rather than deducted. Purchase allowances (b), purchase returns (c), and purchase discounts (d) are all deductions from the purchase price of inventory, which reduce the cost basis of the inventory before calculating the cost of goods sold.