Dorman Co. sold merchandise to Smith Co. on account, $23,500, terms 2/15, net 45. The cost of the merchandise sold is $16,000. Dorman Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Smith Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?

Question

Quizplus · Accepted Answer

- The net sales are the total sales minus any returns, discounts, or allowances.
- Total sales: $23,500
- Cost of goods sold: $16,000
- Gross profit: $23,500 - $16,000 = $7,500
- Return: $1,750
- Net sales: ($23,500 - $1,750) = $21,750
- Since the Smith Co. paid within the discount period, they received 2% discount on the total invoice amount: $23,500 x 2% = $470
- Net sales after discount: $21,750 - $470 = $21,280
- However, the cost of the returned merchandise needs to be deducted from the cost of goods sold: $16,000 - $1,400 = $14,600
- Gross profit after deduction: $23,500 - $14,600 = $8,900
- Net sales after deduction and discount: $21,280
- Therefore, the best choice is C: $21,315.

Dorman Co Sold Merchandise to Smith Co