Question

Kelly’s Jewelry has the following transactions during the year: total jewelry sales = $750,000; sales discounts = $20,000; sales returns = $50,000; sales allowances = $30,000. In addition, at the end of the year the company estimates the following transactions associated with jewelry sales in the current year will occur next year: sales discounts = $2,000; sales returns = $6,000; sales allowances = $4,000. Compute net sales.

Answer 1

net sales: 638,000

Step-by-step explanation:

Accounting works on accrual basis. We must match the transaction with the period they occur. The year-end adjustment are done to reflect the discount, return and allowance forthe current year sales so; we must include thme in the calculation for this year. If not, then we will be charging next year sales with discount on sales of the previous year.

salesrevenue : 750,000

discount (20,000 + 2,000) (22,000)

allowance (30,000 + 4,000) (34,000)

returns (50,000 + 6,000) (56,000)

net sales: 638,000