Diversified Industries Sells Perishable Electronic Products

question 37

Essay

Diversified Industries sells perishable electronic products. Some must be shipped in reusable containers. Customers pay a deposit for each container. The deposit is equal to the container's cost. Customers receive a refund when the container is returned. During 2013, deposits collected on containers shipped were $700,000. Deposits are forfeited if containers are not returned in 18 months. Containers held by customers on January 1, 2013, were $330,000. During 2013, $410,000 was refunded and deposits of $25,000 were forfeited.
Required:
1. Prepare the appropriate journal entries for the deposits received and returned during 2013.
2. Determine the liability for refundable deposits to be reported in the December 31, 2013, balance sheet.

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or other activity levels, allowing more accurate comparisons to actual spending.

Budget Coordination

The process of ensuring all parts of an organization's budget align with its strategic and operational goals.

Large Company

A corporation that typically has a high level of capitalization, extensive operations, a large number of employees, and generates a significant amount of revenue.

Sales Forecast

An estimate of the quantity of goods or services that will be sold in a future period.