Valley Companys adjusted account balances from its general ledger on August 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: sales salaries expense, rent expenseselling space, store supplies expense, and advertising expense. It categorizes the remaining expenses as general and administrative.

Adjusted Account Balances	Debit	Credit
Merchandise inventory (ending)	$ 36,500
Other (non-inventory) assets	146,000
Total liabilities		$ 42,158
Common stock		71,965
Retained earnings		49,133
Dividends	8,000
Sales		249,660
Sales discounts	3,820
Sales returns and allowances	16,478
Cost of goods sold	96,761
Sales salaries expense	34,203
Rent expenseSelling space	11,734
Store supplies expense	2,996
Advertising expense	21,221
Office salaries expense	31,208
Rent expenseOffice space	2,996
Office supplies expense	999
Totals	$ 412,916	$ 412,916

Beginning merchandise inventory was $29,456. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs.

Invoice cost of merchandise purchases	$ 107,310
Purchases discounts received	2,254
Purchases returns and allowances	5,151
Costs of transportation-in	3,900

Problem 4-4A (Algo) Preparing closing entries and interpreting information about discounts and returns LO C1, P3

Required:

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

a. Record the entry to close the income statement accounts with credit balances.

b. Record the entry to close the income statement accounts with debit balances.

c. Record the entry to close income summary.

d. Record the entry to close the Dividends account.