Reference no: EM132467657

Cathy Store uses a perpetual inventory system. Cathy Store had beginning inventory of 100 units, $50 each at May 1. During May 2019, Cathy Store had the following merchandising transactions.

Point 1: May 2 Purchased merchandise of 200 units, $60 each on account from Surf company, terms 1/10, n/30, FOB shipping point. Made a cash payment of $1,000 for freight on this date.

Point 2: 10 Paid Surf company for the merchandise purchased on May 2 in full.

Point 3: 12 Purchased merchandise of 150 units, $65 each for cash from Tom company, FOB destination.

Point 4: 15 Sold merchandise of 250 units, $100 each on account to Mel company, terms 1/10, n/30.

Point 5: 18 Granted Mel company $500 credit for the damaged merchandise that had a scrap value of $0.

Point 6: 20 Received payment in full from Mel company for the merchandise sold on 15 May.

Required:

Question (a) Journalize the transactions assuming Cathy Store uses the moving average-cost method. Omit descriptions for the journal entries.

Question (b) Calculate gross profit under the moving average-cost method and First-in, First-out (FIFO) method, respectively.