Check your answer
Write your response and explain your reasoning.
Northstar supplies these year-end cost facts:
- supplier price, $24,000;
- ordinary inbound freight, $1,200;
- normal receiving and production handling, $800;
- fixed production overhead allocated at supported normal capacity, $3,000;
- emergency air freight caused by Northstar's scheduling error, $500;
- abnormal spoilage from an unplanned control failure, $900;
- fixed overhead left unallocated because output was abnormally low, $1,500; and
- sales commissions, $1,100.
Classify each cost and compute the accepted inventory pool. Cite the activity, normality, and location-and-condition evidence used for each conclusion.
For an independent periodic close, beginning inventory is $9,000, net purchases are $26,000, and supported ending inventory is $11,000. Compute cost of goods sold and state which causes of missing goods this residual cannot identify.
For a perpetual record, book inventory is 500 units at $20 each. A controlled count finds 488 owned units. Investigation proves that a 4-unit, $80 receipt was posted twice. The remaining 8-unit difference is a supported inventory loss; no cutoff, consignment, return, transfer, or unit-of-measure exception remains. Prepare the unit reconciliation and both correcting entries. Explain why the recordkeeping system remains separate from FIFO, average, or LIFO.
Use ASC 330-10-30-1 through 30-8 for the cost boundary and paragraph 30-9 for the separate cost-flow-method decision.
Compare your reasoning with the worked answer
Northstar's accepted inventory cost is $29,000: $24,000 supplier price, $1,200 ordinary inbound freight, $800 normal handling, and $3,000 supported normal-capacity fixed overhead. Expense the $500 emergency freight, $900 abnormal spoilage, $1,500 unallocated overhead, and $1,100 sales commission. The accepted pool is based on the supplied facts. The calculation does not prove normality, allocation quality, or source completeness.
Under the periodic facts, cost of goods sold is $24,000: $9,000 beginning inventory plus $26,000 net purchases less $11,000 supported ending inventory. The periodic system does not separately identify the causes of missing units because ending inventory enters the residual calculation.
Under the perpetual facts, begin with 500 book units. Reverse the duplicate 4-unit receipt and its $80 inventory and payable. The corrected book balance is 496 units. The controlled count is 488 units, leaving an 8-unit supported loss at $20, or $160. Debit the supported loss account and credit inventory for $160. The two adjustments reduce inventory by 12 units and $240, ending at 488 units.
Periodic or perpetual describes record timing. FIFO, average, or LIFO assigns cost. Neither system proves the owned population, qualifying pool, or cause of a difference.