Question

Kelly’s Jewelry has the following transactions during the year: total jewelry sales = $560,000; sales discounts = $10,500; sales returns = $31,000; sales allowances = $11,000. In addition, at the end of the year the company estimates the following transactions associated with jewelry sales in the current year will occur next year: sales discounts = $1,050; sales returns = $3,720; sales allowances = $1,470. Compute net sales.
Total sales
Less: Sales discounts
Less: Sales returns
Less: Sales allowances
Net sales
Could you explain how you get the amounts to use for the chart?

Answer 1

Answer:

The net sales to be recorded is 504,980 dollars.

Explanation:

Based on accounting matching principle which directs a company to report an expense on its income statement in the period in which the related revenues are earned. SO all sales related expenses, commissions, discounts and taxed should be recorded in same period in which revenue is recognized.  However, sales returns are recorded in the period in which

they actually occured.

So based on above explain we will compute net sales as follow.

Total sales                            = $ 560,000                  =    $560,000

Less: Sales discounts          = $    10,500 + $ 1,050  =      ($ 11,550)

Less: Sales returns *             = $    31,000                   =      ($ 31,000)

Less: Sales allowances       = $    11,000 + $ 1,470    =      ($ 12,470)

Net sales                                                                     =    $ 504,980

Will be recorded in the year in which it occurs.