Check your answer
Write your response and explain your reasoning.
Northstar's December 31 warehouse count contains 124 units, including 9 units held for a supplier. The executed supplier agreement says the supplier retains control until Northstar sells a unit to an end customer. No such sale occurred.
Northstar owns 14 unsold units held by a dealer. Its agreement permits Northstar to require their return or redirect them, and the dealer has no unconditional duty to pay before an end-customer sale.
Eleven inbound units left a vendor on December 30. Their executed agreement states that control and the unconditional payment duty pass when the carrier accepts identified goods. The carrier accepted them on December 30; they arrived January 3. Northstar posted the payable on January 4.
Seven outbound units left Northstar on December 31 and are absent from the count. Their executed customer agreement states that control passes only on documented delivery. Delivery occurred January 2. Northstar recorded revenue, a receivable, and cost of goods sold on December 31.
Prepare the count-to-owned-population reconciliation and a rights-ledger row for each adjustment. State the year-end inventory, payable, revenue, receivable, and cost-transfer consequences. Identify the records supporting each date and explain what the unit calculation cannot prove. Use ASC 606-10-25-23 through 25-30 and 55-79 through 55-82.
Compare your reasoning with the worked answer
Begin with 124 counted units. Remove 9 supplier-owned consigned units. Add 14 Northstar-owned units at the dealer, 11 inbound units whose control passed on carrier acceptance, and 7 outbound units whose control remains with Northstar until delivery. The owned population is 147 units: 124 - 9 + 14 + 11 + 7.
Record the 11 inbound units and related payable in the year-end period. Keep the 7 outbound units in inventory and reverse or defer the related revenue, receivable, and cost transfer until the supported delivery event. Keep the 14 unsold dealer units in Northstar's inventory. Exclude the 9 supplier-owned units and do not record a purchase for them.
The rights ledger should cite the executed agreements, carrier records, dealer reports, and delivery evidence. The arithmetic proves that the five supplied quantities reconcile. It does not establish that the agreements are complete, enforceable, unmodified, or applied to the correct identified goods.