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 2021, deposits collected on containers shipped were $910,000. Deposits are forfeited if containers are not returned within 18 months. Containers held by customers at January 1, 2021, represented deposits of $577,000. In 2021, $807,000 was refunded and deposits forfeited were $43,500.

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.

Answer 1

Dr $910,000 Cash Liability Deposits for Refundable $910,000 Wability for Refundable. Deposits 807,000 co 807000 43,500 Liability for Refundable Deposits sale of Containers 43500 43500 43500 Cost of Goods sold Inventory of Containers (Assuming Perpetual Inventory System)

Liability for Refundable Deposits Liability for Refundable Deposits, $577,000 1 January 1, 2021 Addi Deposits received during 2021 910,000 Less - Deposits returned during 2021 (807,000) I Deposits forfeited during 2021 (43,500) Balance, December 31, 2021 $636,500