Solaris Company Limited, makers of solar water heaters, uses a perpetual inventory system. The company also adjusts

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Question:

Solaris Company Limited, makers of solar water heaters, uses a perpetual inventory system. The company also adjusts the cost of goods sold for any shortage or excess inventory. During the first quarter of 2021, the company carried out a number of transactions related to its ‘Suncorp” brand. The company began the quarter, on January 1, 2021, with merchandise inventory of 10 Suncorp heaters at a total cost of $170,000. During the rest of the quarter from January to March, the company undertook the following transactions related to its ‘Suncorp’ brand.

January 12	Purchased 15 water heaters at a cost of $ 16,000 each. The additional freight charge was $ 1,000 per unit.
January 31	Sold 18 Suncorp heaters to Dynamics Ltd at $23,000 each
February 6	Purchased 24 units from a supplier at a cost of $18,400 per unit but the supplier gave a 4% quantity discount.
February 15	Sold 15 Suncorp units to Acme Ltd and 10 units to Sun Power Ltd for total revenues of $685,250.
February 28	Owing to an increased demand for Suncorp heaters, 30 additional units were purchased on account at a cost of $18,620 per unit. These were subject to a trade discount of 3.5% each
March 9	Sold 23 units to Sunblazers Ltd at a price of $26,800 per unit.
March 16	An actual count of inventory was carried out which revealed that there were 15 units of Suncorp heaters in the warehouse.
March 20	Due to its increasing popularity, the company purchased 25 units at a total cost of $485,500.
March 25	5 units purchased on March 20 were returned to the supplier, as there were defects in the heating tank.
March 31	Sold 22 units to two customers (Acme Ltd & Dynamics Ltd) at a selling price of $26,850 per unit.

All purchases were on account and received on the dates stated

Required:

1. Prepare a perpetual inventory record for Solaris Company Limited, using the first-in, first-out (FIFO) method to determine the value of ending inventory at March 31, 2021, and the total amount to be assigned to the cost of goods sold for the period.

2. Given that selling, distribution and administrative costs for the quarter were $22,960 and $74,240 respectively, prepare an income statement for Solaris Company Ltd for the period, to determine the net profit for the quarter, assuming the perpetual inventory system.

3. You are told that 8 of the Suncorp units sold on March 9, 2021, were on account. State the journal entries necessary to record the transactions on February 28 and March 9, assuming the business uses a:

-Perpetual inventory system

-Periodic inventory system