Tyler returned $500 worth of merchandise within the discount period. the entry to record the return would be placed into what account?

Tyler purchased something on account. I'm using the gross method of recording.

1) Purchases  xx
         Accounts Payable       xx

2) Return of merchandise w/in discount period
 
     Accounts Payable   500
                  Purchases         500

3) Payment of remaining merchandise w/in discount period
      Accounts Payable  xx
                     Cash                             xx
                     Purchase discounts   xx

Merchandise that can be discounted but returned w/in the discount period should be recorded with its original value.