Chapter 5, Problem 3PSA

To determine

Concept Introduction:

Net Sales:

The net sales can be defined as sales after subtracting sales discounts and sales returns and allowances. The net sales are the sales which actually took place. The net sales are calculated as −

  $\text{Net Sales = Sales – Sales Discounts – Sales returns and allowances}$

To compute:

The company's net sales

To determine

Concept Introduction:

Total cost of Merchandise:

Cost of merchandise can be defined as the total cost incurred to purchase the goods. The cost of merchandise is calculated after subtracting purchase discounts received and purchases returns and allowances from Invoice cost of merchandise purchase and adding cost of transportation to it.

  $\begin{array}{l}\text{Total cost of merchandise = Invoice cost of merchandise – }\left(\begin{array}{l}\text{Purchase Discounts received}\\ \text{+ Purchase returns and allowances}\end{array}\right)\\ \text{ + Cost of transportation-in}\end{array}$

To Compute:

The Company's total cost of merchandise

To determine

Concept Introduction:

Income Statement:

The income statement can be explained as the statement giving details about the revenues, incomes, gains and expenses, losses etc. The income statement is prepared to determine net income or loss of the business by listing all the revenues, gains and expenses and losses of the business. It can be single step income statement as well multi step income statement.

To prepare:

Multi step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses

To determine

Income Statement:

The income statement can be explained as the statement giving details about the revenues, incomes, gains and expenses, losses etc. The income statement is prepared to determine net income or loss of the business by listing all the revenues, gains and expenses and losses of the business. It can be single step income statement as well multi step income statement.

To prepare:

Single-step Income statement that includes categories like net sales, cost of goods sold, selling expenses, and general and administrative expenses