On May 1, Schilling Company sold merchandise in the amount of $5,800 to a customer, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Schilling uses the perpetual inventory system and the gross method. On May 5, the customer complains that $500 of the merchandise arrived damaged. Schilling offers a price reduction of 40% on the damaged merchandise, which the buyer accepts. On May 10, payment is received from the customer for the total amount due. The entry recorded on May 10th would be: 1) Debit Cash $5,488 and Sales Discounts $112; credit Sales $5,600 2) Debit Cash $5,800; credit Accounts Receivable $5,800 3) Debit Cash $5,488 and Sales Discounts $112; credit Accounts Receivable $5,600 4) Debit Cash $5,684 and Sales Discounts $116; credit Accounts Receivable $5.800 A company uses the perpetual inventory system and recorded the following entry: Dr. Accounts Payable Cr. Merchandise Inventory Cr. Cash 2,500 50 2,450 This entry reflects a