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 $890,000. Deposits are forfeited if containers are not returned within 18 months. Containers held by customers at January 1, 2021, represented deposits of $595,000. In 2021, $827,000 was refunded and deposits forfeited were $56,750. 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 < 1 2 3 4 > Record the deposits collected. < 1 2 3 4 Record the containers returned. < 1 2 3 4 Record the deposits forfeited - record revenue. < 1 2 3 4 Record the deposits forfeited - adjust inventory. Determine the liability for refundable deposits to be reported on the December 31, 2021, balance sheet. Balance on December 31

Answer 1

1. (a) Dr Cash $890,000

Cr Liability for refundable deposits $890,000

(b) Dr Liability for refundable deposits $827,000

Cr Cash $827,000

(c) Dr Liability for refundable deposits $56,750

Cr Sale of containers $56,750

(d) Dr Cost of goods sold $56,750

Cr Inventory of containers $56,750

2.$601,250

Step-by-step explanation:

1.Preparationof the appropriate journal entries for the deposits received, returned, and forfeited during 2021.

(a) Dr Cash $890,000

Cr Liability for refundable deposits $890,000

(b) Dr Liability for refundable deposits $827,000

Cr Cash $827,000

(c) Dr Liability for refundable deposits $56,750

Cr Sale of containers $56,750

(d) Dr Cost of goods sold $56,750

Cr Inventory of containers $56,750

2. Calculation to determine the liability for refundable deposits to be reported on the December 31, 2021, balance sheet.

Using this formula

Ending liability for refundable deposits = Liability for refundable deposits, January 1, 2021 + Deposits received during 2021 - Deposits returned during 2018 - Deposits forfeited during 2021

Let plug in the formula

Ending liability for refundable deposits= $595,000 + $890,000 - $827,000 - $56,750

Ending liability for refundable deposits= $601,250

Therefore the liability for refundable deposits to be reported on the December 31, 2021, balance sheet is $601,250