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Question 5 (Total 20 marks) 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. Purchased merchandise of 200 units, S60 cach on account from Surf company, terms 1/10, n/30, FOB shipping point. Made a cash payment of $1,000 for freight on this May 2 date. 10 Paid Surf company for the merchandise purchased on May 2 in full. Purchased merchandise of 150 units, S65 each for cash from Tom company, FOB destination. 12 15 Sold merchandise of 250 units, $100 each on account to Mel company, terms 1/10, n/30. Granted Mel company $500 credit for the damaged merchandise that had a scrap value of S0. Received payment in full from Mel company for the merchandise sold on 15 May. 18 20 Required: (a) Journalize the transactions assuming Cathy Store uses the moving average-cost method. Omit descriptions for the journal entries. (7 marks) (b) Calculate gross profit under the moving average-cost method and First-in, First-out (FIFO) method, respectively. (3 marks) (c) Suppose Cathy Store uses a periodic inventory system instead and had 200 units of merchandise on hand on May 31 as the results of the above transactions. Assume Cathy Store also had merchandise in transit of 100 units, $68 each shipped FOB shipping point, terms 1/10, n/30, by the seller on May 31. If Cathy Store ignored those units in transit when taking physical inventory on May 31, what and how financial statements will be affected under the average-cost method and FIFO method, respectively. (10 marks)

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