Prepare journal entries for the following merchandising transactions of Powell Company assuming it uses a perpetual inventory system and the gross method.
May 1. Powell purchased merchandise with a price of $875 and credit terms of n∕30.
12. Powell returned merchandise that had a price of $125.
31. Powell paid the amount due from the May 1 purchase, minus the May 12 return.
June 3. Powell sold merchandise for $450, with credit terms n∕15. Cost of the merchandise is $300.
5. The customer discovers some of the units are scratched. Powell gives a price reduction (allowance) and credits the customer’s accounts receivable for $20 to compensate for the scratches.
18. Powell received payment for the amount due from the June 3 sale less the June 5 allowance.