Multiple Choice
Which of the following best describes the Allowance for Sales Discounts account in relation to net sales?
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4. Merchandising Operations
Net Sales
Multiple Choice
A company reports gross sales of \$500,000, sales returns and allowances of \$20,000, and sales discounts of \$5,000. What is the company's net sales?
A
\$485,000
B
\$480,000
C
\$495,000
D
\$475,000
Verified step by step guidance1
Step 1: Understand the concept of net sales. Net sales are calculated by subtracting sales returns and allowances, as well as sales discounts, from gross sales.
Step 2: Write the formula for net sales: Net Sales = Gross Sales - Sales Returns and Allowances - Sales Discounts.
Step 3: Identify the values provided in the problem: Gross Sales = \$500,000, Sales Returns and Allowances = \$20,000, Sales Discounts = \$5,000.
Step 4: Substitute the values into the formula: Net Sales = \$500,000 - \$20,000 - \$5,000.
Step 5: Perform the subtraction step-by-step to calculate the net sales. First subtract Sales Returns and Allowances from Gross Sales, then subtract Sales Discounts from the result.
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