E4-18: Purchase-related transactions

Milan Co., a womens clothing store, purchased $120,000 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30. Milan Co. returned $16,000 of the merchandise, receiving a credit memorandum, and then paid the amount due within the discount period. Illustrate the effects on the accounts and financial statements of Milan Co. to record (a) the purchase, (b) the merchandise return, and (c) the payment.