Question

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

		Debit			Credit
Merchandise inventory (ending)		$	43,000
Other (noninventory) assets			65,150
Total liabilities					$	25,400
Common stock						17,360
Retained earnings						21,700
Dividends			8,500
Sales						225,700
Sales discounts			2,260
Sales returns and allowances			12,000
Cost of goods sold			72,100
Sales salaries expense			31,100
Rent expense—Selling space			9,000
Store supplies expense			1,700
Advertising expense			13,500
Office salaries expense			28,200
Rent expense—Office space			3,300
Office supplies expense			350
Totals		$	290,160		$	290,160

Beginning merchandise inventory was $25,400. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs.

Invoice cost of merchandise purchases	$	91,900
Purchases discounts received		2,300
Purchases returns and allowances		4,500
Costs of transportation-in		4,600

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

Answer 1

Valley Company Closing Enteries Date Particulars Aug-31 Sales a/c Dr. To Income summary (Revenue accounts closed) Debit in $ Credit in $ 225700 225700 173510 Aug-31 Income summary a/c Dr. To Sales discounts To Sales returns and allowances To Cost of goods sold To Sales salaries expense To Rent expense-Selling space To Store supplies expense To Advertising expense To Office salaries expense To Rent expense-Office space To Office supplies expense (Expense accounts closed) 2260 12000 72100 31100 9000 1700 13500 28200 3300 350 52190 Aug-31 Income summary a/c Dr. To Retained earnings (Profits transferred) 52190 Dr. 8500 Aug-31 Retained earnings a/c To Dividends (Dividends recorded) 8500