Multiple Choice
Which of the following is a benefit of being an employee paid on commission?
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4. Merchandising Operations
Net Sales
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If you buy a $1,000 bicycle from a retailer and later return it for a full refund, how should the retailer report this transaction when calculating net sales?
A
Ignore the return and report $1,000 as net sales.
B
Report $1,000 as a sales discount.
C
Subtract $1,000 from gross sales as a sales return to determine net sales.
D
Add $1,000 to gross sales to determine net sales.
Verified step by step guidance1
Understand the concept of net sales: Net sales are calculated by subtracting sales returns, allowances, and discounts from gross sales. This ensures the reported revenue reflects the actual income generated from sales transactions.
Identify the type of transaction: In this case, the customer returned the bicycle for a full refund. This qualifies as a sales return, which reduces the gross sales amount.
Determine the adjustment to gross sales: Since the $1,000 bicycle was returned, the retailer must subtract $1,000 from gross sales to account for the sales return.
Avoid incorrect classifications: Do not classify the $1,000 as a sales discount or ignore the return, as these actions would misrepresent the retailer's financial performance.
Calculate net sales: After subtracting the $1,000 sales return from gross sales, the resulting figure represents the net sales, which accurately reflects the retailer's revenue after accounting for returns.
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