Problem 7 30 points

Presented here are selected transactions for the Wombat Company during August. Wombat uses the perpetual inventory system. Prepare the necessary journal entries.

August 1 Sold merchandise to Miller Company for $40,000, terms 2/10,n/30. The merchandise sold had a cost of $25,000.

4 Purchased merchandise from Davis Company for $65,000, terms 2/10, n/30.

6 Received payment from Miller Company for purchase of August 1.

8 Returned merchandise to Davis Company costing $5,000.

10 Paid Davis Company for August 4 purchase.