Finding Net Sales and Gross profit?

Question

Sales $420,000
Cost of Goods sold 279000
Sales Returns and allowances 10,000
Selling expense 58,000
Sales discounts 6,000
income tax expense 15,000

The question asks prepare income statement starting with NET SALES and show gross profit. Treat sales discounts as an EXPENSE.....confused??

Answer 1

Most of the time, you're expected to deduct sales returns and sales discounts from sales to get net sales. In this case it looks like they want you to treat sales discount as a selling expense, something to attract sales. So net sales = $420,000 less sales returns $10,000 = $410,000

Income statement
Net sales $410,000
COGS $279,000
Gross profit $131,000
Less:
Operating expenses
Selling expense $58,000
Sales discounts $6,000
Profit before taxes $67,000
Income taxes $15,000
Profit after taxes $52,000

Answer 2

Net Sales Gross Profit

Answer 3

Gross Profit Net Sales

Answer 4

Net sales is figured by deducting returns and discounts from the gross sales $420,000. In this case do not deduct the sales discounts. basically take 420K - returns 0f 10K. Gross profit is the difference between revenue (420K) and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments

Answer 5

230,000 gross profit.

Answer 6

Hope this helps!