Question

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.

		Debit			Credit
Merchandise inventory		$	42,000
Other (noninventory) assets			61,920
Total liabilities					$	25,600
Common stock						15,920
Retained earnings						19,900
Dividends			8,300
Sales						225,200
Sales discounts			2,250
Sales returns and allowances			13,500
Cost of goods sold			72,200
Sales salaries expense			31,300
Rent expense—Selling space			8,700
Store supplies expense			1,500
Advertising expense			12,000
Office salaries expense			29,200
Rent expense—Office space			3,400
Office supplies expense			350
Totals		$	286,620		$	286,620

On August 31, 2016, merchandise inventory was $25,300. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.

Invoice cost of merchandise purchases	$	91,100
Purchases discounts received		2,200
Purchases returns and allowances		4,800
Costs of transportation-in		4,800

Required:

1. Prepare closing entries as of August 31, 2017 (the perpetual inventory system is used).

Answer 1

Date	General Journal	Debit	Credit
31-Aug	Sales	225,200
	Income summary		225,200
31-Aug	Income summary	174,400
	Sales discounts		2,250
	Sales returns and allowances		13,500
	Cost of goods sold		72,200
	Sales salaries expense		31,300
	Rent expense—Selling space		8,700
	Store supplies expense		1,500
	Advertising expense		12,000
	Office salaries expense		29,200
	Rent expense—Office space		3,400
	Office supplies expense		350
31-Aug	Income summary	50,800		(225200-174400)
	Retained earnings		50,800
31-Aug	Retained earnings	8,300
	Dividends		8,300