Use the data provided to calculate net sales for 2019.
Reese Industries data
Sales
Merchandise Inventory
$696,818
Sales Discounts
548,477
Interest Expense
57,746
3,521
Sales Returns and Allowances
81,225
Interest Revenue
10,532
Cost of Goods Sold
205,899
Rent Expense
10.258
Depreciation Expense: Office Equipment
3,361
Insurance Expense
2,341
Advertising Expense
10,081
Accounts Receivable
93,023
Office Supplies Expense
1,952
Rent Revenue
23,751
Sales Salaries Expense
29,515
Accounts payable
138,764
Common Stock
50,049
Marketing expense
30,890
Answer (1)
Net sales is calculated as gross sales minus sales discounts and sales returns and allowances.
Identify the given values: Gross Sales = $696,818, Sales Discounts = $57,746, Sales Returns and Allowances = $81,225.
Calculate the sum of sales discounts and sales returns and allowances: $57,746 + $81,225 = $138,971.
Subtract the total discounts and allowances from gross sales to find net sales: $696,818 - 138 , 971 = \boxed{ 557,847} .
Explanation
Understanding the Problem We are given the following information from Reese Industries for 2019:
Merchandise Inventory: $696,818
Sales Discounts: $57,746
Sales Returns and Allowances: $81,225
We need to calculate the net sales for 2019. Net sales is calculated by subtracting sales discounts and sales returns and allowances from gross sales. In this case, we are given the merchandise inventory, which we will assume to be the gross sales.
Setting up the Calculation The formula for net sales is:
Net Sales = Gross Sales − Sales Discounts − Sales Returns and Allowances
We are given:
Gross Sales (Merchandise Inventory) = $696,818
Sales Discounts = $57,746
Sales Returns and Allowances = $81,225
Calculating Net Sales Now, we plug in the given values into the formula:
\text{Net Sales} = $696,818 - $57,746 - $81,225
\text{Net Sales} = $696,818 - ($57,746 + $81,225)
\text{Net Sales} = $696,818 - $138,971
\text{Net Sales} = $557,847
Final Answer Therefore, the net sales for Reese Industries in 2019 is $557,847.
Examples
Understanding net sales is crucial for evaluating a company's financial performance. For instance, imagine you're running a lemonade stand. Your gross sales are all the money you made before accounting for any discounts or refunds. If you offered a discount for repeat customers (sales discount) or had to refund a customer due to a sour batch (sales returns and allowances), your net sales would be the actual revenue you keep after subtracting these amounts. Knowing your net sales gives you a clearer picture of how much money you actually earned and helps you make informed decisions about pricing, discounts, and product quality.
