On July 31, 2012, the balances of the accounts appearing in the ledger of Sagebrush Company are as follows: $ 18,300 $ 12,000 Cash Sales Returns and Allowances Accounts Receivable 72,000 Sales Discounts Purchases 8,000 Merchandise Inventory. August 1, 2011 Office Supplies Prepaid Insurance Land 700,000 90,000 Purchases Returns and Allowances 6,000 3,000 Purchases Discounts 4,000 4,500 Freight In 30,000 300,000 Sales Salaries Expense 300,000 Store Equipment Accumulated Depreciation- Advertising Expense Delivery Expense Depreciation Expense- Store Equipment Miscellaneous Selling Expense Office Salaries Expense 270,000 55,000 9,000 Store Equipment Office Equipment 55,900 78,500 6,000 Accumulated Depreciation- Office Equipment 10,000 16,000 27,800 150,000 Accounts Payable Rent Expense 30,000 3,000 8,300 Salaries Payable Insurance Expense Office Supplies Expense 3,000 Unearned Rent 2,000 50,000 80,000 Depreciation Expense- Office Equipment Miscellaneous Administrative Expense Notes Payable Capital Stock Retained Earnings 1,500 275,300 3,500 Dividends 35,000 Rent Revenue 7,000 Sales 1,660,000 Interest Expense 2,000 Instructions 1. Does Sagebrush Company use a periodic or perpetual inventory system? Explain. 2. Prepare a multiple-step income statement for Sagebrush Company for the year ended July 31, 2012. The merchandise inventory as of July 31, 2012, was $80,000. 3. Prepare the closing entries for Sagebrush Company as of July 31, 2012. 4. What would be the net income if the perpetual inventory system had been used?