Diversified Industries Sells Perishable Electronic Products

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.