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 $899,000. Deposits are forfeited if containers are not returned within 18 months. Containers held by customers at January 1, 2018, represented deposits of $597,000. In 2018, $838,000 was refunded and deposits forfeited were $54,000. 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

1)

sr. no.	journal	Debit	Credit
1)	cash	$899000
	To liability- refundable deposits		$899000
2)	liability - refundable deposits	$838000
	To cash		$838000
3)	Liability - refundable deposits	$54000
	To revenue - sales of containers		$54000
4)	cost of goods sold	$54000
	To inventory of customers		$54000

2) answer = $604000

Explanation:

Balance on jan. 1	$597000
Deposit received	$899000
Deposit returned	($838000)
Deposit forfieted	($54000)
Balance on december 31	$604000