Use the data for Valley Company in Problem 5-3A to complete the following requirements.
In Problem 5-3A
Valley Company's adjusted trial balance on August 31, 2017, its fiscal year-end, follows.

On August 31, 2016, merchandise inventory was $25,400. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.
Invoice cost of merchandise purchases ........................... $92,000
Purchases discounts received ...................................... 2,000
Purchases returns and allowances ................................ 4,500
Costs of transportation-in ......................................... . 4,600
Required
1. Prepare closing entries as of August 31, 2017 (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?

Deblt 41,000 30,00 Credit Merchandise Inventory Other (noninventory) assets Total labillitles... K. Valley, Capital. K. Valley, Withdrawals Sales Sales discounts Sales returns and allowances Cost of goods sold Sales salarles expense. Rent expense-Selling space.... Store supplies expense $25,000 04,550 8,000 225,600 2,250 12,000 74,500 2,00 8,000 ,500 1300 Office salarles expense Rent expense-Office space 28,500 3,600 $355,150 $355.150