Question

Diversified Semiconductors sells perishable electronic components. Some must be shipped and stored in reusable protective containers. Customers pay a deposit for each container received. The deposit is equal to the container’s cost. They receive a refund when the container is returned. During 2018, deposits collected on containers shipped were $916,000. Deposits are forfeited if containers are not returned within 18 months. Containers held by customers at January 1, 2018, represented deposits of $546,000. In 2018, $804,000 was refunded and deposits forfeited were $43,750. Required: 1. Prepare the appropriate journal entries for the deposits received and returned during 2018. 2. Determine the liability for refundable deposits to be reported on the December 31, 2018, balance sheet.

Answer 1

Answer: Please see answer in the explanation column

Step-by-step explanation:

a) To record Deposit Collected

Account Debit Credit

Cash $916,000

Liability—refundable deposits $916,000

b) To record Deposit Returned

Account Debit Credit

Liability—refundable deposits $804,000

Cash $804,000

c) Deposits Forfeited-- To record forfeited deposits

Account Debit Credit

Liability—refundable deposits $43,750.

Revenue—sale of containers $43,750.

d) To record adjustment of inventory on deposits forfeited

Account Debit Credit

Cost of goods sold $43,750.

Inventory of containers $43,750.

2)liability for refundable deposits to be reported on the December 31, 2018, balance sheet.

Balance on January 1 $546,000

Deposits received +$916,000

Deposits returned -$804,000

Deposits forfeited - $43,750

Balance on December 31 $614,250