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23 November, 17:20

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 $850,000. Deposits are forfeited if containers are not returned within 18 months. Containers held by customers at January 1, 2018, represented deposits of $530,000. In 2018, $790,000 was refunded and deposits forfeited were $35,000. 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.

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  1. 23 November, 21:18
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    1.

    (a)

    Cash A/c Dr. $850,000

    To Liability for refundable deposits $850,000

    (b)

    Liability for refundable deposits A/c Dr. $790,000

    To Cash A/c $790,000

    (c)

    Liability for refundable deposits A/c Dr. $35,000

    To Sale of containers $35,000

    (d)

    Cost of goods sold A/c Dr. $35,000

    To Inventory of containers $35,000

    2. The liability for refundable deposits to be reported on the December 31, 2018, balance sheet:

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

    = $530,000 + $850,000 - $790,000 - $35,000

    = $555,000
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