One of Zoe Inc.€™s suppliers was going out of business. Zoe agreed to purchase the supplier€™s remaining inventory stored in the spa manufacture€™s warehouse for $1.7 million cash plus 10% HST (harmonized sales tax). Zoe also paid a shipping company $30,000 to deliver the inventory to its (Zoe€™s) warehouse. The inventory consisted of three categories of items:

Zoe used the relative fair value method to allocate costs to the three categories of inventory.

Required:
a. Prepare journal entries to record the purchase of the inventory and payment of related costs.
b. Calculate the amount to be allocated to each of the three types of inventory.

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Estimated retail selling price Inventory item Number 2 person spa 4 person spa $5,000 6,000 200 140 90 7,500 6 person spa