Aging of receivables estimating allowance for doubtful accounts Instructions Chart of Accounts Starting Question Aging of Receivables Schedule Additional Question Journal Final Question Instructions 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, 2015 1 A B C D E F G H 2 Days Past Due Days Past Due Days Past Due Days Past Due Days Past Due 3 Customer Balance Not Past Due 1 30 31 60 61 90 91 120 Over 120 4 ABC Beauty 15,000 00 15,000 00 5 Angel Wigs 8,000 00 8,000 00 6 7 Zodiac Beauty 3,000 00 3,000 00 8 Subtotals 875,000 00 415,000 00 210,000 00 112,000 00 55,000 00 18,000 00 65,000 00 The following accounts were unintentionally omitted from the aging schedule Customer Due Date Balance Arcade Beauty Aug 17, 2015 $10,000 Creative Images Oct 30, 2015 8,500 Excel Hair Products July 3, 2015 7,500 First Class Hair Care Sept 8, 2015 6,600 Golden Images Nov 23, 2015 3,600 Oh That Hair Nov 29, 2015 1,400 One Stop Hair Designs Dec 7, 2015 4,000 Visions Hair Nail Jan 11, 2016 9,000 Wig Creations has a past history of uncollectible accounts by age category, as follows Age Class Percent Uncollectible Not past due 1 130 days past due 4 3160 days past due 16 6190 days past due 25 91120 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 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, 2015 Journalize the adjustment for uncollectible accounts Refer to the chart of accounts for a listing of the account titles the company uses 5 Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement Chart of Accounts CHART OF ACCOUNTS Wig Creations Company General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable Arcade Beauty 122 Accounts Receivable Creative Images 123 Accounts Receivable Excel Hair Products 124 Accounts Receivable First Class Hair Care 125 Accounts Receivable Golden Images 126 Accounts Receivable Oh That Hair 127 Accounts Receivable One Stop Hair Designs 128 Accounts Receivable Visions Hair Nail 129 Allowance for Doubtful Accounts 131 Interest Receivable 132 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Store Equipment 192 Accumulated Depreciation Store Equipment 193 Office Equipment 194 Accumulated Depreciation Office Equipment LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense Store Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 530 Office Salaries Expense 531 Rent Expense 532 Depreciation Expense Office Equipment 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense Starting Question 1 Determine the number of days past due for each of the following accounts If an account is not past due, enter a zero Customer Due Date Number of Days Past Due Arcade Beauty Aug 17, 2015 days Creative Images Oct 30, 2015 days Excel Hair Products July 3, 2015 days First Class Hair Care Sept 8, 2015 days Golden Images Nov 23, 2015 days Oh That Hair Nov 29, 2015 days One Stop Hair Designs Dec 7, 2015 days Visions Hair Nail Jan 11, 2016 days Aging of Receivables Schedule 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 Aging of Receivables Schedule December 31, 2015 1 Days Past Due Days Past Due Days Past Due Days Past Due Days Past Due 2 Customer Balance Not Past Due 1 30 31 60 61 90 91 120 Over 120 3 ABC Beauty 15,000 00 15,000 00 4 Angel Wigs 8,000 00 8,000 00 5 6 Zodiac Beauty 3,000 00 3,000 00 7 Subtotals 875,000 00 415,000 00 210,000 00 112,000 00 55,000 00 18,000 00 65,000 00 8 Arcade Beauty 9 Creative Images 10 Excel Hair Products 11 First Class Hair Care 12 Golden Images 13 Oh That Hair 14 One Stop Hair Designs 15 Visions Hair Nail 16 Totals 17 Percentage uncollectible 18 Estimate of uncollectible accounts Additional Question 3 Estimate the allowance for doubtful accounts, based on the aging of receivables schedule $ Journal 4 Assume that the allowance for doubtful accounts for Wig Creations has a credit balance of $7,375 before adjustment on December 31, 2015 Journalize the adjustment for uncollectible accounts Refer to the chart of accounts for a listing of the account titles the company uses PAGE 1 JOURNAL DATE DESCRIPTION POST REF DEBIT CREDIT 1 2 Final Question 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 overstated by because the allowance for doubtful accounts would be by In addition, the owners capital account would be by because bad debt expense would be and net income by on the income statement

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Aging of receivables; estimating allowance for doubtful accounts Instructions Chart of Accounts Starting Question Aging of Receivables Schedule Additional Question Journal Final Question Instructions Wig

Aging of receivables; estimating allowance for doubtful accounts

Instructions

Chart of Accounts

Starting Question

Aging of Receivables Schedule

Additional Question

Journal

Final Question

Instructions

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, 2015:

1	A	B	C	D	E	F	G	H
2				Days Past Due	Days Past Due	Days Past Due	Days Past Due	Days Past Due
3	Customer	Balance	Not Past Due	1-30	31-60	61-90	91-120	Over 120
4	ABC Beauty	15,000.00	15,000.00
5	Angel Wigs	8,000.00			8,000.00
6	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~
7	Zodiac Beauty	3,000.00		3,000.00
8	Subtotals	875,000.00	415,000.00	210,000.00	112,000.00	55,000.00	18,000.00	65,000.00

The following accounts were unintentionally omitted from the aging schedule:

Customer	Due Date	Balance
Arcade Beauty	Aug. 17, 2015	$10,000
Creative Images	Oct. 30, 2015	8,500
Excel Hair Products	July 3, 2015	7,500
First Class Hair Care	Sept. 8, 2015	6,600
Golden Images	Nov. 23, 2015	3,600
Oh That Hair	Nov. 29, 2015	1,400
One Stop Hair Designs	Dec. 7, 2015	4,000
Visions Hair & Nail	Jan. 11, 2016	9,000

Wig Creations has a past history of uncollectible accounts by age category, as follows:

Age Class	Percent Uncollectible
Not past due	1%
130 days past due	4%
3160 days past due	16%
6190 days past due	25%
91120 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.
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, 2015. Journalize the adjustment for uncollectible accounts. Refer to the chart of accounts for a listing of the account titles the company uses.
5.	Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

Chart of Accounts

CHART OF ACCOUNTS

Wig Creations Company

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-Arcade Beauty
122	Accounts Receivable-Creative Images
123	Accounts Receivable-Excel Hair Products
124	Accounts Receivable-First Class Hair Care
125	Accounts Receivable-Golden Images
126	Accounts Receivable-Oh That Hair
127	Accounts Receivable-One Stop Hair Designs
128	Accounts Receivable-Visions Hair & Nail
129	Allowance for Doubtful Accounts
131	Interest Receivable
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

Starting Question

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

Customer	Due Date	Number of Days Past Due
Arcade Beauty	Aug. 17, 2015	days
Creative Images	Oct. 30, 2015	days
Excel Hair Products	July 3, 2015	days
First Class Hair Care	Sept. 8, 2015	days
Golden Images	Nov. 23, 2015	days
Oh That Hair	Nov. 29, 2015	days
One Stop Hair Designs	Dec. 7, 2015	days
Visions Hair & Nail	Jan. 11, 2016	days

Aging of Receivables Schedule

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.

Aging of Receivables Schedule

December 31, 2015

1				Days Past Due	Days Past Due	Days Past Due	Days Past Due	Days Past Due
2	Customer	Balance	Not Past Due	1-30	31-60	61-90	91-120	Over 120
3	ABC Beauty	15,000.00	15,000.00
4	Angel Wigs	8,000.00			8,000.00
5	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~
6	Zodiac Beauty	3,000.00		3,000.00
7	Subtotals	875,000.00	415,000.00	210,000.00	112,000.00	55,000.00	18,000.00	65,000.00
8	Arcade Beauty
9	Creative Images
10	Excel Hair Products
11	First Class Hair Care
12	Golden Images
13	Oh That Hair
14	One Stop Hair Designs
15	Visions Hair & Nail
16	Totals
17	Percentage uncollectible
18	Estimate of uncollectible accounts

Additional Question

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

Journal

4. Assume that the allowance for doubtful accounts for Wig Creations has a credit balance of $7,375 before adjustment on December 31, 2015. Journalize the adjustment for uncollectible accounts. Refer to the chart of accounts for a listing of the account titles the company uses.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Final Question

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 overstated? by because the allowance for doubtful accounts would be ___ by . In addition, the owners capital account would be ___ by because bad debt expense would be ___ and net income __ by__ on the income statement.