1. Grocery Ltd is a retailer and sells various products. It follows the perpetual inventory method. Because of supply chain disruptions, the cost of purchasing products increased during the year 2021. However, considering the economic hardship of people caused by Covid-19 pandemic, the company did not increase its sales price. The company purchases goods on three-month credit and sells goods for cash.

The following information relates to the inventories of a particular product and related balances and transactions of the company for the year ended 31 December 2021. The company uses the weighted average method to assign costs to goods sold and ending inventories. The sales price is $3.50 per unit. The income tax rate is 28%.

1 January 2021	Beginning balances: Cash: $60,000 Accounts payable: $8,500. Inventory 10,000 units @ $2.10 per unit.
January-February 2021	Sold 4,000 units.
February 2021	Sales returns: 10 units. Cash is refunded to customers on return of the goods.
March 2021	Purchased 5,000 units @ $2.30 per unit.
March- June 2021	Sold 7,000 units.
July 2021	Purchased 8,000 units @ $2.40 per unit.
July 2021	Purchase returns: 100 units. Accounts payable is adjusted for purchase returns.
July-December 2021	Sold 9,000 units.
December 2021	10 units of the product have been damaged. The company cannot sell them to customers, and therefore, must scrap them. The company expects to sell the remaining goods in inventory at the normal sales price of $3.50 per unit.

Required

1. Give journal entries to record the transactions, including the settlements of accounts payable. Show all the workings.

Prepare the income statement for the year ended 31 December 2021. Also, furnish the relevant note to the income statement.

Prepare the current assets side of the Statement of Financial Position as at 31 December, 2021.