Question

Valley Company’s adjusted trial balance on August 31, its fiscal year-end, follows. It categorizes the following...

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) $ 41000
Other (noninventory) assets 130400
Total liabilities $ 25,000
Common stock 10,000
Retained earnings 94550
Dividends 8,000
Sales 225600
Sales discounts 2250
Sales returns and allowances 12,000
Cost of goods sold 74500
Sales salaries expense 32000
Rent expense—Selling space 8000
Store supplies expense 1,500
Advertising expense 13,000
Office salaries expense 28,500
Rent expense—Office space 3,600
Office supplies expense 400
Totals $ 355,150 $ 355150

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 $ 92000
Purchases discounts received 2,000
Purchases returns and allowances 4,500
Costs of transportation-in 4,600

1.Closing entry!

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Answer #1

1)

Closing Entries
Date Account Titles and Explanation Debit Credit
Aug. 31 Sales Revenue $225,600
Purchase discounts $2,000
Purchase returns and allowances $4,500
   Income Summary $232,100
(To close revenue accounts)
Aug. 31 Income Summary $175,750
Sales discounts $2,250
Sales returns and allowances $12,000
Cost of goods sold $74,500
Sales salaries expense $32,000
Rent expense - Selling space $8,000
Store supplies expense $1,500
Advertising expense $13,000
Office salaries expense $28,500
Rent expense - Office space $3,600
Office supplies expense $400
(To close expense accounts)
Aug. 31 Income Summary ($232,100 - $175,750) $56,350
Retained Earnings $56,350
(To close income summary to retained earnings)
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