Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

The amount of net sales is determined by which of the following formulas?

Net Sales = Sales Revenue + Cost of Goods Sold

Net Sales = Sales Revenue - Sales Returns and Allowances - Sales Discounts

Net Sales = Sales Revenue - Cost of Goods Sold

Net Sales = Sales Revenue + Sales Returns and Allowances + Sales Discounts

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Verified step by step guidance

Understand the concept of Net Sales: Net Sales represent the actual revenue earned from sales after accounting for any deductions such as returns, allowances, and discounts.

Identify the components of the formula: Sales Revenue is the total amount generated from sales before any deductions. Sales Returns and Allowances refer to the reductions in revenue due to returned goods or allowances given to customers. Sales Discounts are reductions in price offered to customers for early payment or other reasons.

Analyze the formula options provided: The correct formula for Net Sales is the one that subtracts Sales Returns and Allowances and Sales Discounts from Sales Revenue, as these deductions reduce the actual revenue earned.

Eliminate incorrect formulas: For example, formulas that add Cost of Goods Sold or Sales Returns and Allowances to Sales Revenue are incorrect because they do not reflect the deductions necessary to calculate Net Sales.

Select the correct formula: Net Sales = Sales Revenue - Sales Returns and Allowances - Sales Discounts. This formula accurately accounts for the deductions that impact the actual revenue earned from sales.