Preparing closing entries and interpreting information about discounts and returns C2 P3: Use the data for Valley Company in Problem 5-4A to complete the following requirements.

Required 1. Prepare closing entries as of August 31, 2013 (the perpetual inventory system is used).

Analysis Component 2. The company makes all purchases on credit, and its suppliers uniformly offer a 3% sales discount. Does it appear that the company’s cash management system is accomplishing the goal of taking all available discounts? Explain.

3. 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. How do this year’s results compare to prior years’ results?