Question

Merchandise costing $1,500 is sold for $2,500 on terms 1/30, n/60. If the customer pays within the discount period, what amount will be reported on the income statement as net sales and as gross profit?

Answer 1

Answer: The net sales is $2475 and the gross sales is $975.

Explanation:

Since we have given that

Cost price = $1,500

Selling price = $2,500

Term 1/30 means buyer pays within 30 days of the date of sale, 1% discount will be allowed.

n/60 means the payment is not paid within 60 days and the full payment is made.

Amount of discount would be

`(1)/(100)* 2500=\$25`

So, Net sales = Sales - discount

Net sales =
`2500-25=\$2475`

and Gross sales = Net sales - Cost

Gross sales =
`2475-1500=\$975`

Hence, the net sales is $2475 and the gross sales is $975.