Problem 4-4A Preparing closing entries and interpreting information about discounts and returns LO C2, P3

Valley Companys adjusted trial balance on August 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: sales salaries expense, rent expenseselling space, store supplies expense, and advertising expense. It categorizes the remaining expenses as general and administrative.

		Debit			Credit
Merchandise inventory (ending)		$	39,800
Other (noninventory) assets			59,450
Total liabilities					$	24,600
Common stock						17,600
Retained earnings						22,000
Dividends			8,000
Sales						225,400
Sales discounts			2,250
Sales returns and allowances			13,500
Cost of goods sold			76,200
Sales salaries expense			32,600
Rent expenseSelling space			8,300
Store supplies expense			1,700
Advertising expense			14,000
Office salaries expense			29,900
Rent expenseOffice space			3,400
Office supplies expense			500
Totals		$	289,600		$	289,600

Beginning merchandise inventory was $26,000. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs.

Invoice cost of merchandise purchases	$	92,400
Purchases discounts received		2,700
Purchases returns and allowances		4,500
Costs of transportation-in		4,800

Required: Prepare closing entries as of August 31 (the perpetual inventory system is used).

Journal entry worksheet

• Record the entry to close the income statement accounts with credit balances.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Aug 31

• Record the entry to close the income statement accounts with debit balances.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Aug 31

• Record the entry to close income summary.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Aug 31

• Record the entry to close the dividends account.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Aug 31