Multiple Choice
Which of the following items are subtracted from net sales when determining earnings available to common shareholders?
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4. Merchandising Operations
Net Sales
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Kendra's company reported total sales of \$500, sales returns and allowances of \$50, and sales discounts of \$25. What is Kendra's net sales amount?
A
\$475
B
\$500
C
\$450
D
\$425
Verified step by step guidance1
Step 1: Understand the concept of net sales. Net sales are calculated by subtracting sales returns, allowances, and discounts from total sales. This provides the actual revenue generated from sales after adjustments.
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 = \$500, Sales Returns and Allowances = \$50, and Sales Discounts = \$25.
Step 4: Perform the subtraction step-by-step. First, subtract Sales Returns and Allowances (\$50) from Total Sales (\$500). Then subtract Sales Discounts (\$25) from the result.
Step 5: The final result after performing the calculations will give you Kendra's net sales amount.
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