On July 31, 2012, the balances of the accounts appearing in the ledger of Sagebrush Company are as follows:

Instructions
1. Does Sagebrush Company use a periodic or perpetual inventory system? Explain.
2. Prepare a multiple-step income statement for Sagebrush Company for the year ended July 31, 2012. The merchandise inventory as of July 31, 2012, was $80,000.
3. Prepare the closing entries for Sagebrush Company as of July 31, 2012.
4. What would be the net income if the perpetual inventory system had beenused?

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18,300 Sales Discounts Accounts Receivable Merchandise Inventory Purchases Returns and Allowances August 1, 2011 90,000 Purchases Discounts 78,500 Miscellaneous Selling Expense 3,000 Office Supplies Expense Peter Richards, Capital 355,300 Miscellaneous Administrative Expense 1,660,000 Interest Expense Sales Returns and Allowances