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

Which of the following best describes how 'Net Sales' would be calculated for Sam's car wash business, given a table showing the hourly cost and total sales for each hour?

Net Sales = Total Sales + Hourly Costs

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

Net Sales = Hourly Costs - Sales Returns and Allowances

Net Sales = Total Sales - Hourly Costs

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Verified step by step guidance

Understand the concept of 'Net Sales': Net Sales is the revenue a company earns from its sales after deducting any sales returns, allowances, and discounts. It represents the actual income from sales activities.

Identify the components of the formula: The formula for Net Sales is typically expressed as: Net Sales = Total Sales - Sales Returns and Allowances - Sales Discounts.

Analyze the options provided: Review each option to determine which one aligns with the standard formula for Net Sales. For example, 'Net Sales = Total Sales - Hourly Costs' does not account for sales returns, allowances, or discounts, so it is incorrect.

Eliminate incorrect options: Disregard options that do not follow the standard formula for Net Sales. For instance, 'Net Sales = Total Sales + Hourly Costs' is incorrect because adding costs to sales does not reflect the concept of Net Sales.

Select the correct answer: The correct formula is 'Net Sales = Total Sales - Sales Returns and Allowances - Sales Discounts,' as it properly accounts for deductions from total sales to calculate the actual revenue earned.