Question

Manual Company sells goods to Nolan Company during 2017. It offers Nolan the following rebates based on total sales to Nolan. If total yearly sales to Nolan are 10,000 units, it will grant a rebate of 2.00%. If it sells up to 20,000 units, it will grant a rebate of 4.00%. If it sells up to 30,000 units, it will grant a rebate of 6.00% In the first quarter of the year, Manual sells 11,000 units to Nolan at a sales price of $110,000.00. Manual, based on past experience, has sold over 40,000 units to Nolan per year. Based upon the above information, what amount should Manual record as revenue based upon both the net and gross method? (check figure: gross method sales revenue $107,800.00)

Answer 1

Answer: See explanation

Explanation:

Based on the information given in the question, we should note that while using the gross method, the revenue gotten from sales will be calculated by subtracting the rebate of 2% from the full invoice amount of $110,000. This will be:

= $110,000 - (2% × $110,000)

= $110,000 - (0.02 × $110,000)

= $110,000 - $2200

= $107800

Using the net method, the revenue gotten from sales will be calculated by subtracting the rebate of 6% from the full invoice amount of $110,000. This will be:

= $110,000 - (6% × $110,000)

= $110,000 - (0.06 × $110,000)

= $110,000 - $6600

= $103400