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 Not Days Past Due Past Customer Balance Due 1 30 31 60 61 90 91 120 Over 120 ABC Beauty 15,000 15,000 Angel Wigs 8,000 8,000 Zodiac Beauty 3,000 3,000 Subtotals 875,000 415,000 210,000 112,000 55,000 18,000 65,000 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 Required 1 Determine the number of days past due for each of the preceding accounts If an account is not past due, enter a zero Customer Due Date Number of Days Past Due Arcade Beauty Aug 17 days Creative Images Oct 30 days Excel Hair Products July 3 days First Class Hair Care Sept 8 days Golden Images Nov 23 days Oh That Hair Nov 29 days One Stop Hair Designs Dec 7 days Visions Hair Nail Jan 11 days Feedback Count the number of days after the due date up to December 31 Do not include the due date in your count Remember that not all months have an equal number of days Learning Objective 4 2 Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals If an amount box does not require an entry, leave it blank Wig Creations Company Aging of Receivables Schedule December 31, 20Y7 Customer Balance Not Past Due Days Past Due 1 30 Days Past Due 31 60 Days Past Due 61 90 Days Past Due 91 120 Days Past Due Over 120 ABC Beauty $15,000 $15,000 Angel Wigs 8,000 8,000 Zodiac Beauty 3,000 3,000 Subtotals 875,000 415,000 210,000 112,000 55,000 18,000 65,000 Arcade Beauty Creative Images Excel Hair Products First Class Hair Care Golden Images Oh That Hair One Stop Hair Designs Visions Hair and Nail Totals Percent uncollectible ( ) Estimate of uncollectible accounts $ $ $ $ $ $ $ Feedback Add the accounts into the aging schedule based on their number of days past due Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group Learning Objective 4 3 Estimate the allowance for doubtful accounts, based on the aging of receivables schedule $ Feedback Add the accounts into the aging schedule based on their number of days past due Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group Learning Objective 4 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 Dec 31 Bad Debt Expense Allowance for Doubtful Accounts Feedback The amount of bad debt expense is affected by the balance in the allowance account Learning Objective 4 5 Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement On the balance sheet, assets would be by $ because the allowance for doubtful accounts would be by $ In addition, the stockholders equity (retained earnings) would be by $ because bad debt expense would be and net income by $ on the income statement Feedback Consider the effects of a contra asset not being recorded in terms of the balance sheet equation Consider the effects of an expense not being reported in terms of the income equation Learning Objective 4

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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

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:

		Not	Days Past Due
		Past
Customer	Balance	Due	1-30	31-60	61-90	91-120	Over 120
ABC Beauty	15,000	15,000
Angel Wigs	8,000			8,000

Zodiac Beauty	3,000		3,000
Subtotals	875,000	415,000	210,000	112,000	55,000	18,000	65,000

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		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

Required:

1. Determine the number of days past due for each of the preceding accounts. If an account is not past due, enter a zero.

Customer	Due Date	Number of Days Past Due
Arcade Beauty	Aug. 17	days
Creative Images	Oct. 30	days
Excel Hair Products	July 3	days
First Class Hair Care	Sept. 8	days
Golden Images	Nov. 23	days
Oh That Hair	Nov. 29	days
One Stop Hair Designs	Dec. 7	days
Visions Hair & Nail	Jan. 11	days

Feedback

Count the number of days after the due date up to December 31. Do not include the due date in your count. Remember that not all months have an equal number of days.

Learning Objective 4.

2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals. If an amount box does not require an entry, leave it blank.

Wig Creations Company
Aging of Receivables Schedule
December 31, 20Y7
Customer	Balance	Not Past Due	Days Past Due 1-30	Days Past Due 31-60	Days Past Due 61-90	Days Past Due 91-120	Days Past Due Over 120
ABC Beauty	$15,000	$15,000
Angel Wigs	8,000			8,000
Zodiac Beauty	3,000		3,000
Subtotals	875,000	415,000	210,000	112,000	55,000	18,000	65,000
Arcade Beauty
Creative Images
Excel Hair Products
First Class Hair Care
Golden Images
Oh That Hair
One Stop Hair Designs
Visions Hair and Nail
Totals
Percent uncollectible (%)		%	%	%	%	%	%
Estimate of uncollectible accounts	$	$	$	$	$	$	$

Feedback

Add the accounts into the aging schedule based on their number of days past due.

Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group.

Learning Objective 4.

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

Feedback

Add the accounts into the aging schedule based on their number of days past due.

Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group.

Learning Objective 4.

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.

Dec. 31	Bad Debt Expense
	Allowance for Doubtful Accounts

Feedback

The amount of bad debt expense is affected by the balance in the allowance account.

Learning Objective 4.

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

On the balance sheet, assets would be by $ because the allowance for doubtful accounts would be by $. In addition, the stockholders’ equity (retained earnings) would be by $ because bad debt expense would be and net income by $ on the income statement.

Feedback

Consider the effects of a contra asset not being recorded in terms of the balance sheet equation.

Consider the effects of an expense not being reported in terms of the income equation.

Learning Objective 4.