Question

Total gross sales for the period include the following:

Credit card sales (discount 3%) $ 9,400
Sales on account (2/15, n/60) $ 12,000
Sales returns related to sales on account were $650. All returns were made before payment. One-half of the remaining sales on account were paid within the discount period. The company treats all discounts and returns as contra-revenues. What amount will be reported on the income statement as net sales?

Answer 1

To calculate net sales, discounts on credit card sales and sales on account and any sales returns need to be subtracted from the total gross sales. After adjustments, the net sales to be reported on the income statement would be $20,354.50.

Step-by-step explanation:

The student's question is related to calculating the net sales for a company given certain details about its gross sales, discounts, and returns. To calculate net sales, we need to adjust gross sales by taking into account the discounts and returns as contra-revenues.

Firstly, we consider the credit card sales which had a 3% discount, resulting in an effective revenue of $9,400 - (3% of $9,400). Next, of the $12,000 sales on account, $650 were returned before payment, leaving $11,350 of which half was paid within the discount period, entitling the customer to a 2% discount on that portion. Hence, the discount is 2% of $5,675. Summing these figures, we get the total net sales that would be reported on the income statement.

Here are the calculations step by step:

• Credit card sales after discount: $9,400 - (0.03 × $9,400) = $9,118
• Sales on account after returns: $12,000 - $650 = $11,350
• Discount on prompt payment (2% of half of the amount after returns): 0.02 × ($11,350 / 2) = $113.50
• Total discounts: $282 (from credit card sales) + $113.50 (from sales on account) = $395.50
• Net sales: ($9,400 + $12,000 - $650) - $395.50 = $20,354.50

Therefore, the net sales to be reported on the income statement would be $20,354.50.

Answer 2

The $20,354.50 will be reported on the income statement as net sales

Step-by-step explanation:

The computation of the net sales is shown below:

= Total sales - discount on credit card sales - sales discount - sales return

where,

total sales = Credit card sales + sales on account

= $9,400 + $12,000

= $21,400

Discount on credit card sales = Credit card sales × discount

= $9,400 × 3%

= $282

Sales discount = (Sales on account - sales return × 0.5(Half payment) × 2%)

= ($12,000 - $650) × 0.5 × 2%

= $113.50

And, the sales return = $650

Now put these values to the above formula,

So the values equal to

= $21,400 - $282 - $113.50 - $650

= $20,354.50