Net Sales ("Gross" Sales less dissatisfied customers and customers who pay us early (8 points) To track our dissatisfied customers, we will use a contra-revenue account called Sales Returns and Allowances. A Sales Return is when the customer returns the goods. A Sales Allowance is when we reduce their invoice (their A/R) to keep them happy. But let's just use one contra-revenue account for both situations To encourage customers to pay us early, we can offer them terms, c.3, if you pay us within 10 days of the invoice, you may take a discount of 2% off your bill. We will track these Sales Discounts in another contra- revenue account called Sales Discounts. We have an SF Giants fun shop in Roseburg, Oregon - no sales tax. We sell S108 of souvenirs to Sue. She will pay us later. We give her terms: 2/10, net 30. Account Date 1/1/20 Memo: Cape, vis, curs pens AUR - Sue The next day, Sue, calls. She thought the pens wrote in orange ink, not "Dodger" blue. We grant her an allowance of $3. Account Date 220 Memo: Granded Sie an allowance of 53 The next day, Sue returns a pennant. The original price was $5. Account DR CR Date 1/3/20 Memo Swe returned a pennant that we sold her for 55 It is now January 7, Sue cuts us a check and takes advantage of the 2% discount Date Account 1/7/20 DR Memo: Swe paid early, fook 2% discount If Sue is our only customer, what were our net sales for January? Gross Sales Less: Sales Returns and Allowances Less: Sales Discounts Net Sales Assume we are using the Periodic Inventory system so there is no need for a joumal entry to return this item to inventory EXTRA CREDIT (4 Points Possible) Using Accounts Receivable as a source of IMMEDIATE Cash (factoring) Let's assume we have a total of $250,000 of A/R and an Allowance for Doubtful Accounts of $1,500. We sell these A/R to a Factor and they agree to pay us $235,000 Accounts Date 1/1/20 Please assume this transaction qualifies as a sale rather than a loan