Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end,
ID: 2341201 • Letter: V
Question
Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.
On August 31, 2016, merchandise inventory was $25,100. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.
Required:
1. Prepare closing entries as of August 31, 2017 (the perpetual inventory system is used).
Debit Credit Merchandise inventory $ 40,500 Other (noninventory) assets 62,090 Total liabilities $ 25,500 Common stock 17,200 Retained earnings 21,500 Dividends 8,800 Sales 226,200 Sales discounts 2,210 Sales returns and allowances 13,000 Cost of goods sold 74,300 Sales salaries expense 32,800 Rent expense—Selling space 8,800 Store supplies expense 1,800 Advertising expense 14,000 Office salaries expense 28,200 Rent expense—Office space 3,500 Office supplies expense 400 Totals $ 290,400 $ 290,400Explanation / Answer
Ans. Date Accounts Titles and Explanations Debit Credit 31-Aug-17 Sales 226200 To Income summary 226200 (amount of sales transferred to income summary) 31-Aug-17 Income summary 179010 To Sales discounts 2210 To Sales returns and allowances 13000 To cost of goods sold 74300 To Sales salaries expenses 32800 To Rent expenses - Selling space 8800 To Store supplies expenses 1800 To Advertising expenses 14000 To Office salaries expenses 28200 To Rent expenses - Office space 3500 To Office supplies expenses 400 (Expenses are charged from income summary) 31-Aug-17 Income summary (Net income) 47190 To Retained earnings 47190 (Net income is transferred to retained earnings) 31-Aug-17 Retained earnings 8800 To Dividends 8800 (Dividend is charged to retained earnings) *Calculation of Net income: Particulars Amount Amount Sales 226200 Less: Sales discounts -2210 Less: Sales returns and allowances -13000 Net sales 210990 Less: Cost of goods sold -74300 Gross income 136690 Less: Selling and office expenses: Sales salaries expenses -32800 Rent expenses - Selling space -8800 Store supplies expenses -1800 Advertising expenses -14000 Office salaries expenses -28200 Rent expenses - Office space -3500 Office supplies expenses -400 -89500 Net Income 47190
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