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Q3. Barrel Bottom Brewing Corp. manufactures and sells beer. A substantial amount of its sales...

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Accounting

Q3. Barrel Bottom Brewing Corp. manufactures and sells beer. A substantial amount of its sales volume is draft beer. Draft beer is sold to distributors in fifteen-gallon aluminum barrels. Barrel Bottom Brewing pays $4 per barrel to purchase them and charges customers a $5 deposit for the barrel, in addition to the $120 charge for the beer. The deposit is refunded to any distributor who returns a barrel in good condition, without regard to whether the barrel was attributable to beer sold to the distributor. Experience indicates that 90 percent of the barrels are returned undamaged. How should Barrel Bottom Brewing treat the deposits and refunds on the barrels for tax purposes?

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