Chapter 4, Problem 6BTN

To determine

Net Sales:

It is the amount of sales of a company which comes after reducing sales returns and allowances, sales discount.

Cost of Goods Sold (COGS):

Cost of goods or merchandise sold is the total expense or the cost incurred by the business during the process of manufacturing of goods and is directly related to the production. It generally includes the cost of material, labor and other manufacturing support costs.

Net Income:

When total expenses are deducted from total revenue than the resultant is net income or net loss.

Cost of Merchandise Purchased:

It means the cost of merchandise purchased during year. Formula to compute net cost of goods purchased is,

  $\text{Net}\text{cost}\text{of}\text{goods}\text{purchased}=\left(\begin{array}{l}\text{Ending}\text{inventory}+\text{Cost}\text{of}\text{sales}\\ -\text{Opening}\text{inventory}\end{array}\right)$

Gross Profit:

It means the profit which is made after deducting the cost of production and selling cost associated with its products. The formula to calculate positive gross profit is,

  $\text{Gross}\text{profit}=\text{Revenue}-\text{Cost}\text{of}\text{goods}\text{sold}$

1.

Net sales, Cost of Merchandise Purchased, Cost of Merchandise sold (COGS), Gross profit, Net Income.

2.

To determine

To check: Net income with instructor.

3.

To determine

To check: Effects of previously computed amounts in step 1.