Diversified Industries sells perishable electronic products. Some must be shippe
ID: 2474376 • Letter: D
Question
Diversified Industries sells perishable electronic products. Some must be shipped in reusable containers. Customers pay a deposit for each container. The deposit is equal to the container's cost. Customers receive a refund when the container is returned. During 2016, deposits collected on containers shipped were $640,000. Deposits are forfeited if containers are not returned in 18 months. Containers held by customers on January 1, 2016, were $270,000. During 2016, $350,000 was refunded and deposits of $22,000 were forfeited.
Prepare the appropriate journal entries for the deposits received and returned during 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Determine the liability for refundable deposits to be reported in the December 31, 2016, balance sheet.(Amounts to be deducted should be indicated with a minus sign.)
Diversified Industries sells perishable electronic products. Some must be shipped in reusable containers. Customers pay a deposit for each container. The deposit is equal to the container's cost. Customers receive a refund when the container is returned. During 2016, deposits collected on containers shipped were $640,000. Deposits are forfeited if containers are not returned in 18 months. Containers held by customers on January 1, 2016, were $270,000. During 2016, $350,000 was refunded and deposits of $22,000 were forfeited.
Explanation / Answer
1) Cash 640,000
Liability for refundable deposits 640,000
2) Liability for refundable deposits 350,000
Cash 350,000
3) Liability for refundable deposits 22,000
Sale of containers 22,000
4) Cost of goods sold 22,000
Inventory of containers 22,000
Part 2: Determine the liability for refundable deposits to be reported on the December 31, 2016, balance sheet.
Liability for refundable deposits, January 1, 2016 $270,000
Add: Deposits received during 2016 640,000
Deduct: Deposits returned during 2016 (350,000)
Deposits forfeited during 2016 (22,000)
Balance, December 31, 2016 $538,000