Use the data for Valley Company in Problem 4-3A to complete the following requirements.

Required

1. Prepare closing entries as of August 31, 2018 (the perpetual inventory system is used).

2. In prior years, the company experienced a 4% returns and allowance rate on its sales, which means approximately 4% of its gross sales were eventually returned outright or caused the company to grant allowances to customers. Compute the ratio of sales returns and allowances divided by gross sales. How does this year’s ratio compare to the 4% ratio in prior years?

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Invoice cost of merchandise purchases ... $92,000 Purchases discounts received.. 2,000 Purchases returns and allowances. Costs of transportation-in.... 4,500 4,600