Aging of receivables; estimating allowance for doubtful accounts Obj. 4 Wig Creations Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest. The accounts receivable clerk for Wig Creations prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 20Y7:

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5 30 31 ABC Beauty Angel Wigs Zodiac Beauty Subtotals 15,000 8,000 3,000 875,000 18,000 8,000 112,000 15,000 415,000 3,000 210,000 55,000 1–30 31–60 61–90 Not Due Past Customer Balance 91–120 Days Past Due A B C D E F G H 65,000 120 Over The following accounts were unintentionally omitted from the aging schedule. Assume all due dates are for the current year except for Visions Hair & Nail, which is due in the next year.

Customer Due Date Balance Arcade Beauty Aug. 17 $10,000 Creative Images Oct. 30 8,500 Excel Hair Products July 3 7,500 First Class Hair Care Sept. 8 6,600 Golden Images Nov. 23 3,600 Oh That Hair Nov. 29 1,400 One Stop Hair Designs Dec. 7 4,000 Visions Hair & Nail Jan. 11 9,000 Wig Creations has a past history of uncollectible accounts by age category, as follows:

Age Class Percent Uncollectible Not past due 1%

1–30 days past due 4 31–60 days past due 16 61–90 days past due 25 91–120 days past due 40 Over 120 days past due 80 Instructions 1. Determine the number of days past due for each of the preceding accounts.

2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals.

3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.

4. Assume that the allowance for doubtful accounts for Wig Creations has a credit balance of $7,375 before adjustment on December 31. Journalize the adjustment for uncollectible accounts.

5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

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