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 2011, 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, 2011, represented deposits of $530,000. In 2011, $790,000 was refunded and deposits forfeited were $35,000.
Required:
1. Prepare the appropriate journal entries for the deposits received and returned during 2011.
2. Determine the liability for refundable deposits to be reported on the December 31, 2011, balance sheet.