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

Required

1. Prepare closing entries as of August 31, 2016 (the perpetual inventory system is used).

Analysis Component

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?

In Problem 4-3A

Valley Company's adjusted trial balance on August 31, 2016, its fiscal year-end, follows.

On August 31, 2015, merchandise inventory was $25,400. Supplementary records of merchandising activities for the year ended August 31, 2016, reveal the following itemized costs.
Invoice cost of merchandise purchases . . . . . . . . . $92,000
Purchase discounts received . . . . . . . . . . . . . . . . . . . 2,000
Purchase returns and allowances . . . . . . . . . . . . . . . 4,500
Costs of transportation-in . . . . . . . . . . . . . . . . . . . . 4,600

Deblt Credit 130,0 Total Iiabilities..._ ___._.___.. .__... $25,000 0,000 430 Common stock ...._. .__... 5100 Sales 225,600 2,250 .12,000 A,00 32,000 5100 1,900 ,000 .28,500 3,600 400 Sales returns and allowances Rent expense Selling space.... Office salaries expense s. Totals..___. _.._ ___._.___.. .__... $355,150 $355,150