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 $15,000 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 80% of the containers on April 10. Prepare the entries to record the forfeiture of the deposit. |
1.
| Date | Account Titles and Explanation | Debit | Credit |
| April 5 | Cash | $15,000 | |
| Deposit against equipment rental | $15,000 | ||
| April 10 | Deposit against equipment rental | $15,000 | |
| Cash | $15,000 |
2.
| Date | Account Titles and Explanation | Debit | Credit |
| April 5 | Cash | $15,000 | |
| Deposit against equipment rental | $15,000 | ||
| April 10 | Deposit against equipment rental | $15,000 | |
| Deposit forfeited | $3,000 | ||
| Cash (15000*80%) | $12,000 | ||
| April 10 | Deposit forfeited | $3,000 | |
| Equipment (3000/2) | $1,500 | ||
| Gain on forfeiture of deposit | $1,500 |
Get Answers For Free
Most questions answered within 1 hours.