Prepare journal entries for the following transactions. Sold merchandise on account to Red Co., the list price was $20,000, terms 2/15, n/30. The cost of the merchandise sold was $ 7,000. (record this transaction net of discount) Sold merchandise on account to Smith Co. $50,000. The cost of the merchandise sold was $20,000. Received merchandise returned by Smith from the sale above in the amount of $4,000, the cost of the merchandise returned was $1,500. Received cash from the sale to Smith less the return.