Multiple Choice
If a company sells gift cards with a face value of $50 each and offers a 10\% sales discount, what would be the net sales revenue recognized for 5 of the gift cards?
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4. Merchandising Operations
Net Sales
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Which of the following best describes 'Net Sales' for a retail business like Mr. Brown's store in 2012?
A
Total sales revenue before any deductions
B
Total sales revenue minus sales returns, allowances, and discounts
C
Total cash received from customers during the year
D
Total profit after deducting all expenses from sales revenue
Verified step by step guidance1
Understand the concept of 'Net Sales': Net Sales refers to the total revenue generated from sales after deducting sales returns, allowances, and discounts. It represents the actual revenue earned from sales transactions.
Identify the components of Net Sales: These include Total Sales Revenue, Sales Returns, Allowances, and Discounts. Each of these elements impacts the calculation of Net Sales.
Break down the formula for Net Sales: Net Sales = Total Sales Revenue - Sales Returns - Allowances - Discounts. This formula helps to determine the adjusted revenue after accounting for deductions.
Clarify the incorrect options: 'Total sales revenue before any deductions' refers to Gross Sales, not Net Sales. 'Total cash received from customers during the year' is related to cash flow, not Net Sales. 'Total profit after deducting all expenses from sales revenue' refers to Net Income, not Net Sales.
Apply the concept to Mr. Brown's store: For a retail business like Mr. Brown's store, Net Sales is the most accurate measure of revenue after accounting for customer returns, allowances for damaged goods, and discounts offered during the year.
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