Multiple Choice
Which of the following best describes how 'Net Sales' is calculated on an income statement?
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4. Merchandising Operations
Net Sales
Multiple Choice
If the Porter family has total sales of \$8,000, sales returns and allowances of \$500, and sales discounts of \$300, what is their net sales?
A
\$7,500
B
\$7,200
C
\$8,800
D
\$8,000
Verified step by step guidance1
Step 1: Understand the concept of net sales. Net sales is calculated by subtracting sales returns, allowances, and discounts from total sales.
Step 2: Write the formula for net sales: Net Sales = Total Sales - Sales Returns and Allowances - Sales Discounts.
Step 3: Substitute the given values into the formula. Total Sales = \$8,000, Sales Returns and Allowances = \$500, and Sales Discounts = \$300.
Step 4: Perform the subtraction step-by-step. First, subtract Sales Returns and Allowances from Total Sales, then subtract Sales Discounts from the result.
Step 5: The final result will give the net sales value, which represents the actual revenue earned after accounting for returns, allowances, and discounts.
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