A. Deferred revenues-customer deposits Eastern Brewing Company (EBC) distributes

Question

A. Deferred revenues-customer deposits Eastern Brewing Company (EBC) distributes its products in an aluminum keg. Customers are charged a deposit of $36 per keg, and deposits received from customers are recorded in the keg deposits account. Required: 1. Not available in Connect. 2. A production specialist who works for EBC estimates that 50 kegs for which deposits were received during the year will never be retumed. How would the deposits related to these 50 kegs be reflected in the company's financial staterments? (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 Record deposit revenue. Note: Enter debits betore credits. Transaction General Journal Debit Credit No journal entry required Cash Deferred rent revenue Deferred subscription revenue Keg deposits Record en View general journal B. Deferred revenues-rent

Explanation / Answer

a) since revenue is from the sale of aluminium keg,and the company is quite sure that there will not be a return of the deposits on account of sales return,

Hence the same should be recognised as sales and should be recorded as

cash a/c dr 1800

revenue from deposits cr. 1800

b)since there has been a receipt of an advance from the customer for rent the initial entry will be with an amount of

$81500 as below:

cash a/c dr. 81900

advance from customer a/c cr. 81900

and with the passage of time the rent will be credited i.e

for the month of sept.

advance from customer a/c dr. (81900/6) 13650

rent a/c cr. 13650

and the same entry will be repeated for oct. nov. & dec.

On 31/12

there will be current liability in the books of an amount of $27300 in the name of advance from custmer

and the rent received of $54600 will be credited to P&L a/c

i.e 13650 every month as:

rent a/c dr. 13650

P&L a/c cr. 13650

c) Since newsletter's 64 subscribers have only paid in advance, therefoere the cash entry will be:

cash a/c dr. (64*72) 4608

deferred revenue subscription a/c cr. 4608

and later on at the end of the month the deferred revenue subscription will be recorded as revenue on timely basis as:

deferred revenue subscription a/c dr. (6*64) 384

revenue from sales a/c cr. 384

and for those 36 subscribers since no advance is received and no service is provided, no entry is required for the month of april

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