Question

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Exercise 13-7 (Algo) Customer deposits [LO13-3] 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 2021, deposits collected on containers shipped were $883.000. Deposits are forfeited if containers are not returned within 18 months. Containers held by customers at January 1, 2021, represented deposits of $550.000. In 2021, $820,000 was refunded and deposits forfeited were $56.500. Required: 1. Prepare the appropriate journal entries for the deposits received, returned, and forfeited during 2021. 2. Determine the liability for refundable deposits to be reported on the December 31, 2021. balance sheet. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entries for the deposits received, returned, and forfeited during 2021. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet 2 3 4 Record the deposits collected. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal Required 1 Required 2 >

Answer 1

The customer deposits are basically advance against the containers for order received and that needs to be shipped. It is general business scenario where containers are used to transfer products to the buyer and the deposit has been taken against the containers which would be forfeited if the containers are not transferred back to the seller within 18 months. The containers are transferred within 18 months and hence, the deposits are to refunded after considering the damages. Such forfeiture is to be adjusted as sales and added to inventory as adjustment.

Part 1

Date	Particulars	Debit ($)	Credit ($)
	Cash	883,000
	Liability for refundable deposits		883,000
	(To record deposits collected)
	Liability for refundable deposits	820,000
	Cash		820,000
	(To record deposits refunded)
	Liability for refundable deposits	56,500
	Sale of containers		56,500
	(To record deposits forfeited and adjusted)
	Cost of goods sold	56,500
	Inventory of containers		56,500
	(To record deposits forfeited converse into inventory assuming perpetual inventory system)

Part 2

Particulars	Amount ($)
Liability for refundable deposits, January 1,2021	550,000
Add: deposits received during 2021	883,000
Less: deposits refunded during 2021	(820,000)
Deposits forfeited during 2021	(56,500)
Balance as on December 31,2021	$ 556,500

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