Part A: (20 marks) Prepare journal entries for the following merchandising transactions of Selfridges, assuming it uses a perpetual inventory system and the gross method. May 1 Purchased merchandise from Ryder Company for $7,000 under credit terms of 1/20, n/30, FOB shipping point, invoice date May 1. 3 Sold merchandise to Ciate Company for $3,000 under credit terms of 2/15, 1/60, FOB destination, invoice dated May 3. The merchandise had cost $ 2,200. 4 Paid $110 cash for shipping charges on the purchase of May 1. 6 Paid $85 cash for shipping charges related to the sale to Ciate Company on May 3. 10 After negotiations with Ryder concerning problems with the purchases on May 1, Selfridges received a price reduction from Ryder of $400 off the $ 7,000 of goods purchased. 13 Ciate returned merchandise from May 3 sale that had cost Selfridges $200 and was sold for $500. The merchandise was restored to inventory. 18 Received balance due from Ciate for the May 3 sale less return on May 13. 21 Paid the amount due Ryder Company for the May 1 purchase less price from May 10. 25 Purchased merchandise from Smith Company for $ 5,500 under credit terms of 2/15, n/30, FOB destination, invoice dated May 30. 27 Upon the request of Smith, Selfridges paid $150 cash for freight charges on May 25 purchase, reducing the amount owed accounts payable) to Smith. Part B: (5 marks) 1. Under the periodic inventory system, explain if firms need to make shrinkage adjustment? 2. What is a multiple-step income statement? Briefly explain the three main parts