Question

Barnel Corp. owns and manages 19 apartment complexes. On signing a lease, each tenant must pay the first and last months’ rent and a $500 refundable security deposit. The security deposits are rarely refunded in total because cleaning costs of $150 per apartment are almost always deducted. About 30% of the time, the tenants are also charged for damages to the apartment, which typically cost $100 to repair. If a 1-year lease is signed on a $900 per month apartment, what amount would Barnel report as refundable security deposit?

Answer 1

Answer:

It could be in the form of

(1) a refund of $500 or

(2) the amount of a total refund of $320, cleaning costs of $150 and penalties of $30.

Explanation:

The security deposit which is refundable is a liability.

This includes a likely future loss of economic benefits resulting from a specific entity's present duty to transfer funds as well as provide services to another organization as a consequence of a past transaction in the future.

The sum of liability reported for the refundable security deposit ($500) is the likely future economic benefit sacrifice.