Valley Company’s adjusted trial balance on August 31, 2016, its fiscal year-end, follows. Debit Credit Merchandise inventory $ 38,000 Other (noninventory) assets 152,000 Total liabilities $ 43,890 Common stock 51,152 Retained earnings 74,433 Dividends 8,000 Sales 259,920 Sales discounts 3,977 Sales returns and allowances 17,155 Cost of goods sold 100,577 Sales salaries expense 35,609 Rent expense—Selling space 12,216 Store supplies expense 3,119 Advertising expense 22,093 Office salaries expense 32,490 Rent expense—Office space 3,119 Office supplies expense 1,040 Totals $ 429,395 $ 429,395

On August 31, 2015, merchandise inventory was $30,666. Supplementary records of merchandising activities for the year ended August 31, 2016, reveal the following itemized costs.

Invoice cost of merchandise purchases	$	111,720
Purchase discounts received		2,346
Purchase returns and allowances		5,363
Costs of transportation-in		3,900

VALLEY COMPANY
Income Statement
For Year Ended August 31, 2016
Sales		$259,920
Less: Sales discounts	$3,977
Less: Sales returns and allowances	17,155	21,132
Net sales		238,788
		238,788
Expense
Selling expenses
Total selling expenses		0
General and administrative expenses
Total general and administrative expenses		0
Total expenses		0

3. Prepare a multiple-step income statement that begins with net sales and includes separate categories for: cost of goods sold, selling expenses, and general and administrative expenses.