Question: At the beginning of July, CD City has a balance in inventory of $2,900. The following transactions occur during the month of July.

July 3 Purchase CDs on account from Wholesale Music for $1,800, terms 2/10, n/30.

July 4 Pay freight charges related to the July 3 purchase from Wholesale Music, $100.

July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $300.

July 11 Pay Wholesale Music in full.

July 12 Sell CDs to customers on account, $4,800, that had a cost of $2,500.

July 15 Receive full payment from customers related to the sale on July 12.

July 18 Purchase CDs on account from Music Supply for $2,600, terms 1/10, n/30.

July 22 Sell CDs to customers for cash, $3,700, that had a cost of $2,000.

July 28 Return CDs to Music Supply and receive credit of $200.

July 30 Pay Music Supply in full.

Required: 1. Assuming that CD City uses a perpetual inventory system, record the transactions.

2. Prepare the top section of the multiple-step income statement through gross profit for the month of July.