Question

The adjusted trial balance of Blue Spruce Corp. Shows these data pertaining to sales at the end of its fiscal year, October 31, 2022: Sales Revenue $908,400; Freight-Out $12,600; Sales Returns and Allowances $20,900; and Sales Discounts $14,700. Prepare the sales section of the income statement

Answer 1

The preparation of the Sales section of the income statement for Blue Spruce Corp. is as follows:

BLUE SPRUCE CORP.

Income Statement

For the year ended October 31, 2022

Sales Revenue                         $908,400

Sales Returns and Allowances  (20,900)

Sales Discounts                           (14,700)

Net sales revenue                  $872,800

How makes up the net sales revenue?

The net sales revenue represents the gross revenue minus sales returns and allowances and sales discounts.

In most jurisdictions, the sales discount account is reported on the income statement as a contra revenue account.  This implies that sales discounts are directly deducted from the gross sales and do not appear in the expense section nor the notes to the sales or revenue.

Data and Calculations:

Sales Revenue $908,400

Freight-Out $12,600

Sales Returns and Allowances $20,900

Sales Discounts $14,700

Thus, the preparation of the sales section of the income statement for Blue Spruce Corp. shows a net sales revenue of $872,800.

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