Arndt Company Provides The Following Information For The Mon
Arndt Company Provides The Following Information For The Month Ended O
Arndt Company provides the following information for the month ended October 31, 2014: sales on credit $280,000, cash sales $100,000, sales discounts $5,000, sales returns and allowances $11,000. Prepare the sales revenues section of the income statement based on this information. Arndt COMPANY Income Statement (Partial) For the Month Ended October 31, 2014 : $ [removed]
Paper For Above instruction
The sales revenue section of an income statement provides a detailed account of the total revenue generated from sales activities, factoring in sales discounts, returns, and allowances to present the net sales figure. For Arndt Company, the objective is to accurately calculate the net sales for the month ended October 31, 2014, by consolidating credit and cash sales and adjusting for discounts and returns. This process involves several key steps that ensure the income statement reflects the company's actual sales performance during the period.
First, we need to identify the gross sales figures. According to the provided data, Arndt Company made sales on credit totaling $280,000 and cash sales totaling $100,000. These two figures combine to give the total gross sales before adjustments:
Total Gross Sales: $280,000 (credit) + $100,000 (cash) = $380,000
Next, we need to account for sales discounts. Sales discounts of $5,000 are reductions offered to customers, often for early payment or promotional purposes. Discounts reduce the overall revenue that the company retains from its sales:
Total Sales Discounts: $5,000
Additionally, sales returns and allowances of $11,000 must be deducted. These represent products returned by customers and allowances granted for damaged or unsatisfactory goods, which decrease the actual revenue earned:
Sales Returns and Allowances: $11,000
To compute the net sales, we subtract the total sales discounts and returns/allowances from gross sales:
Net Sales = Gross Sales - Sales Discounts - Sales Returns and Allowances
Net Sales = $380,000 - $5,000 - $11,000 = $364,000
This net sales figure of $364,000 represents the true revenue from sales that will appear in the income statement. It provides an accurate reflection of the company's sales performance for the period by showing the income remaining after considering all relevant adjustments.
Sales Revenues Section of Income Statement
The sales revenues section typically includes the gross sales, less sales discounts, returns, and allowances, culminating in net sales. For Arndt Company, the section would be formatted as follows:
- Gross sales: $380,000
- Less: Sales discounts: $5,000
- Less: Sales returns and allowances: $11,000
- Net sales: $364,000
In conclusion, accurately preparing the sales revenues section involves consolidating all sales figures and adjusting for discounts and returns to arrive at the net sales amount. For Arndt Company, this process yields a net sales figure of $364,000 for the month ending October 31, 2014, which accurately reflects the company's revenue from its sales transactions during that period.
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