Chapter 5, Problem 6BTN

To determine

Concept Introduction:

Net Sales: It refers to that part of sales which is derived after deducting sales returns and allowances, sales discounts from gross sales.

Cost of goods sold: It refers to all the costs that a business incurs to produce a product. It is computed by using the formula-

$COGS=Beginning Inventory+Net Purchases-Ending Inventory$

Gross Profit: It is derived by deducting cost of goods sold from its revenues. It depicts the margin that a business is earning from its operating activities.

Inventory shrinkage: Shrinkage in inventory is used to determine the loss of inventory due to theft or damage.

To Determine:

1. Net sales, cost of merchandise purchases, cost of goods sold, gross profit and net income of Official Brands.
2. Physical stock of merchandise computed was $76,000. How this affects previously computed amounts in step 1.