Prepare journal entries to record each of the following transactions. The company records purchases using the gross method and a perpetual inventory system. May 1 Purchased merchandise with a price of \( \$ 900 \) and credit terms of \( n / 30 \). May 7 Returned merchandise that had a price of \( \$ 150 \). May 31 Paid the amount due from the May 1 purchase, minus the May 7 return.

On May 1, when merchandise is purchased, the company needs to record the inventory increase and the accounts payable. The entry would look like this: **May 1:** Debit: Inventory \( \$ 900 \) Credit: Accounts Payable \( \$ 900 \) On May 7, when merchandise is returned, the company decreases its inventory and accounts payable: **May 7:** Debit: Accounts Payable \( \$ 150 \) Credit: Inventory \( \$ 150 \) Finally, on May 31, when the company pays the amount due, we calculate the remaining accounts payable after the return: Remaining amount = \( \$ 900 - \$ 150 = \$ 750 \) The entry for paying the amount due will be: **May 31:** Debit: Accounts Payable \( \$ 750 \) Credit: Cash \( \$ 750 \)