The following selected information is presented for Lively Limited for the year ended February 28, 2015. Lively uses a periodic inventory system.

Instructions
(a) Prepare a multiple-step income statement.
(b) Prepare the year-end adjusting entry that would be made to update the Merchandise Inventory and Cost of Goods Sold accounts.

Accounts receivable Administrative expenses Common shares Dividend:s Freight in Income tax expense Interest expense Merchandise inventory, Mar. 1,2014 Merchandise inventory, Feb. 28, 2015 $32,500 Purchases $ 273,000 39,000 20,800 435,500 27,300 15,600 9,100 4,500 120,900 85,000 42,000 Purchase discounts Purchase returns and allowances Sales 8,450 Sales discounts 9,300 Sales returns and allowances 7,800 Selling expenses 54,600 79,300 Unearned revenue