Party Warehouse Inc. rents a wide variety of products (e.g., tables, chairs, ten
ID: 2532728 • Letter: P
Question
Party Warehouse Inc. rents a wide variety of products (e.g., tables, chairs, tents, and storage containers) for special events. Upon rental, Party Warehouse requires a deposit which is forfeited if the equipment is not returned at the end of the rental period. Deposits charged are twice the cost of the equipment, and Party Warehouse keeps the equipment in its accounting records until deposits are forfeited. On April 5, a customer rented various containers for an event to be held on April 8, and Party Warehouse collected a $10,000 deposit. The containers were returned on April 10.
Required:
1. Prepare the entries to record the receipt of the deposit and refund of the deposit at the end of the rental period.
2. Assume that the customer only returns 90% of the containers on April 10. Prepare the entries to record the forfeiture of the deposit.
Explanation / Answer
1.
2.
a. To record deposit received against equipment rental Date Account Title Debit Credit April.5 Cash 10000 Deposit against equipment rental 10000 b. To record refund of deposit on return of equipment Date Account Title Debit Credit April.10 Deposit against equipment rental 10000 Cash 10000