Muscle Pharm Corporation (MSLPQ)

[crossroad]

jltg, I don't know exactly how it is recorded (I have a finance background, I don't know the accounting treatment of this). However, I can explain it to you the way I understand it:

1. You will have to record all your sales in your internal book at your regular price (I mean, average price for your products to wholesalers like GNC), including give-away portion, and deduct the give-away part to get net sales number to be reported in your published financials.
2. You, however, record cost for all your goods sold, including free stuff in your book to pair revenue with cost. In other words, you pay for your or distributor's promotion in kind.
3. For analytical purpose, gross margin calculation is tricky as you will have to calculate it based on your gross sales, not on net sales. If you look at Musclepharm's pre-accounting-mess financials, you will find gross margin recorded over 30%. This actually put me in trouble as I thought the cost was included in promotion.