Multiple Choice
Net working capital increases when:
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4. Merchandising Operations
Net Sales
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Company B reported the following for the year: Gross Sales of \$500,000, Sales Returns and Allowances of \$20,000, and Sales Discounts of \$10,000. If total expenses for the year were \$300,000, what is the net income for Company B?
A
\$210,000
B
\$180,000
C
\$200,000
D
\$170,000
Verified step by step guidance1
Step 1: Calculate Net Sales. Net Sales is determined by subtracting Sales Returns and Allowances and Sales Discounts from Gross Sales. Use the formula: Net Sales = Gross Sales - Sales Returns and Allowances - Sales Discounts.
Step 2: Substitute the given values into the formula for Net Sales. Gross Sales = $500,000, Sales Returns and Allowances = $20,000, and Sales Discounts = $10,000.
Step 3: Calculate Net Income. Net Income is determined by subtracting Total Expenses from Net Sales. Use the formula: Net Income = Net Sales - Total Expenses.
Step 4: Substitute the calculated Net Sales value and the given Total Expenses value into the formula for Net Income. Total Expenses = $300,000.
Step 5: Review the calculation steps to ensure accuracy and confirm the Net Income value matches the correct answer provided in the problem.
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