Question

Valley Company’s adjusted trial balance on August 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: sales salaries expense, rent expense—selling space, store supplies expense, and advertising expense. It categorizes the remaining expenses as general and administrative.

		Debit			Credit
Merchandise inventory (ending)		$	41,400
Other (noninventory) assets			57,370
Total liabilities					$	24,300
Common stock						16,400
Retained earnings						20,500
Dividends			8,700
Sales						225,200
Sales discounts			2,280
Sales returns and allowances			12,000
Cost of goods sold			74,700
Sales salaries expense			33,000
Rent expense—Selling space			8,700
Store supplies expense			1,900
Advertising expense			12,500
Office salaries expense			29,700
Rent expense—Office space			3,700
Office supplies expense			450
Totals		$	286,400		$	286,400

Beginning merchandise inventory was $25,400. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs.

Invoice cost of merchandise purchases	$	92,900
Purchases discounts received		2,200
Purchases returns and allowances		4,800
Costs of transportation-in		4,800

Required:
Prepare closing entries as of August 31 (the perpetual inventory system is used).

Answer 1

Aug 31	Sales	225200
	Income summary		225200
Aug 31	Income summary	178930
	Sales discounts		2280
	Sales returns and allowances		12000
	Cost of goods sold		74700
	Sales salaries expense		33000
	Rent expense—Selling space		8700
	Store supplies expense		1900
	Advertising expense		12500
	Office salaries expense		29700
	Rent expense—Office space		3700
	Office supplies expense		450
Aug 31	Income summary	46270		=225200-178930
	Retained earnings		46270
Aug 31	Retained earnings	8700
	Dividends		8700