On October 7, Monty Company sold merchandise to a customer for $1,200 with credit terms of 2/10, n/30. The cost of the merchandise is $800. On October 10, Monty granted the customer a $100 allowance on the merchandise the customer purchased on October 7. In the October 10 journal entry, Monty will:

Debit Merchandise Inventory $100; credit Cost of Goods Sold $100

Debit Merchandise Inventory $100; credit Sales Returns and Allowances $100

Debit Sales Returns and Allowance $100; credit Accounts Receivable $100

Debit Sales Discounts $100; credit Accounts Receivable $100