Multiple Choice
K pays on a \$20,000 sale. If the company allows a 2% sales discount for early payment and K pays within the discount period, what amount should be recorded as net sales revenue?
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4. Merchandising Operations
Net Sales
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Which of the following best describes 'Net Sales'?
A
Total revenue from sales minus sales returns, allowances, and discounts.
B
Total cash received from customers during the period.
C
The total of gross earnings for all employees earning hourly wages, salaries, and commissions.
D
Total assets minus total liabilities.
Verified step by step guidance1
Understand the term 'Net Sales' in Financial Accounting. Net Sales refers to the revenue generated from sales after deducting sales returns, allowances, and discounts.
Analyze the options provided in the problem. The correct description of 'Net Sales' should align with its definition.
Option 1: 'Total revenue from sales minus sales returns, allowances, and discounts' matches the definition of Net Sales. This is the correct description.
Option 2: 'Total cash received from customers during the period' refers to cash flow, not Net Sales. This is incorrect.
Option 3 and Option 4: 'Gross earnings for employees' and 'Total assets minus total liabilities' are unrelated to Net Sales. These options are incorrect.
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