Question

Newark Company has provided the following information: Cash sales, $540,000 Credit sales, $1,440,000 Selling and administrative...

Newark Company has provided the following information:

  • Cash sales, $540,000
  • Credit sales, $1,440,000
  • Selling and administrative expenses, $420,000
  • Sales returns and allowances, $99,000
  • Gross profit, $1,450,000
  • Increase in accounts receivable, $64,000
  • Bad debt expense, $42,000
  • Sales discounts, $52,000
  • Net income, $1,030,000

How much are Newark's net sales?

Multiple Choice

  • $1,829,000.

  • $1,787,000.

  • $1,916,000.

  • $1,980,000.

Homework Answers

Answer #1

Given,

  • Cash sales= $540,000
  • Credit sales= $1,440,000
  • Sales discounts= $52,000
  • Sales returns and allowances=$99,000

The Net Sales is Computed by adding Gross Sales i.e Cash Sales plus Credit Sales reduced by Sales Discount, Rebates & Allowances.

Gross Sales = Cash sales +  Credit sales = $540,000 +   $1,440,000 = $19,80,000

Therefore, Net Sales = Gross Sales - Sales discounts - Sales returns and allowances

= $19,80,000 - $52,000 -  $99,000

= $18,29,000

Answer: The Net Sales is : $18,29,000

[Note: Selling and administrative expenses,Increase in accounts receivable, Bad debt expense has no relevance in determining Net Sales]

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