Question
Novak Ltd. operates a microbrewery and sells beer directly to customers, bars, and restaurants. Novak uses one-litre blue glass refillable bottles featuring a swing-top ceramic
Novak Ltd. operates a microbrewery and sells beer directly to customers, bars, and restaurants. Novak uses one-litre blue glass refillable bottles featuring a swing-top ceramic lid. The bottles cost Novak $6.9 each. Novak charges customers a refundable deposit of $7 for each bottle at the point of sale of their beer and records amounts received to the account Returnable Deposits. The $7 deposit amount is standard for this specialized segment of the micro beer industry and is close to the cost of the bottles. In addition, since the bottle returns must be made at the brewery location, Novak is using this relatively high deposit amount as a marketing strategy because it provides an incentive for customers to return to the brewery to have their bottles refilled. Based on past experience, Novak estimates that 60% of the bottles do not get returned for refund. Novak makes an adjustment at the end of the fiscal year for unreturned deposits to the account Container Sales Revenue.
Using the periodic system, prepare a summary journal entry for the cash sale of 1,000 bottles of beer with a selling price of $9, plus bottle deposit recorded to Refund Liability.
Account Titles and Explanation
Debit
Credit
Prepare the year-end adjusting entry for unreturned bottles using the information provided and your entry in part (a).
Account Titles and Explanation
Debit
Credit
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