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
• 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.

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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