Multiple Choice
Which of the following formulas correctly computes net income for a merchandiser?
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4. Merchandising Operations
Net Sales
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Which of the following expressions correctly yields net sales for May?
A
Total Sales Revenue + Cost of Goods Sold
B
Total Sales Revenue - Sales Returns and Allowances - Sales Discounts
C
Total Sales Revenue + Sales Returns and Allowances + Sales Discounts
D
Total Sales Revenue - Cost of Goods Sold
Verified step by step guidance1
Understand the concept of net sales: Net sales represent the actual revenue earned from sales after accounting for deductions such as sales returns, allowances, and discounts.
Identify the components of the formula for net sales: Net sales are calculated as Total Sales Revenue minus Sales Returns and Allowances minus Sales Discounts.
Analyze why other options are incorrect: Adding Cost of Goods Sold or Sales Returns and Allowances to Total Sales Revenue does not align with the definition of net sales, as these are not deductions from revenue.
Focus on the correct formula: Net Sales = Total Sales Revenue - Sales Returns and Allowances - Sales Discounts. This formula accounts for all reductions in revenue due to returns, allowances, and discounts.
Apply the formula to calculate net sales for May: Subtract Sales Returns and Allowances and Sales Discounts from Total Sales Revenue to determine the net sales for the period.
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