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)		$	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!

chart

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)