Question $3$: Accounting for a Merchandising Business $(18$ marks$)$

The last accountant that was hired at Martin's Magic Inc. did not know how to properly value

their inventory. Mrs$.$ Martin wants to ensure that a new accountant knows how to properly

value her inventory using all of the different inventory methods. She has given you the

inventory information for all of the magic potions bought during the month of May. All

purchases and sales were made in cash.

a$)$ Use the schedule provided to determine the cost of goods sold $($COGS$)$ and the value

of the ending inventory for the month of May. Assume that Martin's Magic uses the

perpetual $-$ FIFQ inventory system to value inventory. $(12$ Marks$)$

b$)$ Record the journal entries to recognize the sale of inventory on May $8.(4$ Marks$)$

c$)$ Record the journal entry to recognize the purchase of inventory on May $16(2$ Marks$)$

d$)$ Mrs Martin is curious about what her inventory would be if she were to use a different

system of inventory valuation. Use the schedule provided above to determine the cost

of goods sold $($COGS$)$ and ending inventory for May using Average Cost. $(12$ marks$)$