Question

Gross billings for merchandise sold by Lang Company to its customers last year amounted to $12,520,000; sales returns and allowances were $270,000, sales discounts were $75,000, and freight-out was $140,000. Net sales last year for Lang Company were

a. $12,720,000.
b. $12,275,000.
c. $12,175,000.
d. None of the above.

Answer 1

Net sales are calculated by subtracting sales returns, allowances, and sales discounts from gross billings. For Lang Company, after deducting the sales returns and allowances of $270,000 and sales discounts of $75,000 from the gross billings of $12,520,000, the net sales amount to $12,175,000.

Step-by-step explanation:

To calculate net sales, we start with the gross billings and then subtract any sales returns, allowances, and sales discounts. Freight-out is not deducted from gross sales to determine net sales as it's an operation cost related to delivery. Based on the information provided:

• Gross billings: $12,520,000
• Sales returns and allowances: -$270,000
• Sales discounts: -$75,000

Next, we calculate net sales:

1. Subtract sales returns and allowances from gross billings: $12,520,000 - $270,000 = $12,250,000.
2. Subtract sales discounts from the result: $12,250,000 - $75,000 = $12,175,000.

Since freight-out is not subtracted when calculating net sales, we can ignore the $140,000 freight-out cost. Hence, the net sales last year for Lang Company were $12,175,000.

Answer 2

c. $12,175,000.

Step-by-step explanation:

Given: Merchandise sold by Lang company= $12520000.

Sales return and allowances= $270000.

Discount= $140000.

While calculating net sales, freight out charges is not included as it an selling expense and it should be included while calculating Gross profit of the company.

Here, we have to find the last year net sales for Lang company.

∴
`Net sales= sales\ revenue- (sales\ returns\ and\ allowances + sales\ discount)`

⇒ Net sales =
`12520000-(270000 + 75000) = 12520000 - 345000`

∴Net sales=
`\$ 12175000`