Big Rock Brewery Inc. is a regional producer of craft beers and cider that are sold in
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Refer to Note 3.10 in Exhibit 9-7 and in your own words explain how Big Rock accounts for keg deposits.
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EXCERPT FROM BIG ROCK BREWERY INC. S 2013 ANNUAL REPORT 3.10 Keg Deposits Big Rock requires that customers pay deposits for kegs purchased which are reflected as a liability on the Corpora- tion's consolidated statement of financial position. The deposits are subsequently refunded to customers via invoice credits or cash payments when kegs are returmed. In the normal course of business, there are a percentage of kegs which are never returned for refund. As a result, Big Rock perfoms an analysis based on factors such as total kegs produced, current inventory rates and average keg turnover. In addition, return percentages are calculated and tracked to estimate an average keg turnover rate. Together, this information is used to estimate a keg deposit lability at each reporting date. Any adjustments required to the keg liability account are recorded through revenue.
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Related Book For
Understanding Financial Accounting
ISBN: 978-1118849385
1st Canadian Edition
Authors: Christopher Burnley, Robert Hoskin, Maureen Fizzell, Donald
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