1. Prepare journal entries to record the following merchandise transactions of Martinez Excavation Equipment, which applies the perpetual inventory system and the gross method of recording invoices. May 1 Purchased merchandise from Kona Company for $12,700 under credit terms of 2/15, n/45, FOB destination, and invoice dated May 1. 16 Sold merchandise to Walton for $8,000 under credit terms of 1/10, n/30, FOB destination, invoice date May 3. The merchandise had cost $5,000. Paid $350 cash for shipping charges related to the May 3 sale. Returned $2,000 of the merchandise purchased on May 1 to Kona Company. Walton returned merchandise from the May 3 sale that had cost Martinez $625 and had been sold for $1,000. The merchandise was restored to inventory. 13 Received the balance due from Walton less the return. 14 Paid the amount due Kona Company.