Effects of Transactions on the Inventory AccountPerpetual System Watt Wholesale Company purchases merchandise from a variety of manufacturers and sells the merchandise to a variety of retailers. All sales are subject to a cash discount (2/10, n/30). Watt uses a perpetual inventory system. The May 1 balance in Watts Inventory account was a $70,000 debit. The following transactions occurred during May: May 2 Purchased $5,500 of merchandise from Ajax Manufacturing; terms are 1/10, n/30. 4 Paid $200 freight on the May 2 purchase. 12 Paid Ajax for the May 2 purchase. 14 Purchased $4,000 of merchandise from Baker Manufacturing; terms are 2/10, n/45. 16 Received a $300 allowance on the May 14 purchase since some of the merchandise was the wrong color. All of the merchandise is salable at regular prices. 18 Purchased $2,500 of merchandise from Charles Industries; terms are 2/10, n/30. 19 Sold merchandise with a list price of $2,000 ($1,200 cost) to Daytime Industries. 22 Daytime Industries returned 40 percent of the merchandise from the May 19 sale. 26 Paid Baker Manufacturing for the May 14 purchase. 29 Paid Charles Industries for the May 18 purchase. Required Prepare a schedule that shows the impact of these transactions on Watts Inventory account. Use the following headings: