Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Aging of Receivables; Estimating Allowance for Doubtful Accounts Wig Creations Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest.

Aging of Receivables; Estimating Allowance for Doubtful Accounts

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, 20Y1:

Days Past Due
Customer Balance Not Past Due 1-30 31-60 61-90 91-120 over 120
Subtotals 914,200 507,300 219,400 100,600 33,800 30,200 22,900

The following accounts were unintentionally omitted from the aging schedule:

Customer Due Date Balance
Arcade Beauty May 28, 20Y1 $2,800
Creative Images Sept. 7, 20Y1 5,800
Excel Hair Products Oct. 17, 20Y1 800
First Class Hair Care Oct. 24, 20Y1 1,900
Golden Images Nov. 23, 20Y1 600
Oh The Hair Nov. 29, 20Y1 3,300
One Stop Hair Designs Dec. 2, 20Y1 2,100
Visions Hair and Nail Jan. 5, 20Y2 7,100

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

Age Class Percent Uncollectible
Not past due 2 %
1-30 days past due 4
31-60 days past due 10
61-90 days past due 15
91-120 days past due 35
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 May 28, 20Y1 days
Creative Images Sept. 7, 20Y1 days
Excel Hair Products Oct. 17, 20Y1 days
First Class Hair Care Oct. 24, 20Y1 days
Golden Images Nov. 23, 20Y1 days
Oh The Hair Nov. 29, 20Y1 days
One Stop Hair Designs Dec. 2, 20Y1 days
Visions Hair and Nail Jan. 5, 20Y2 days

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, 20Y1
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
Subtotals
Arcade Beauty
Creative Images
Excel Hair Products
First Class Hair Care
Golden Images
Oh The Hair
One Stop Hair Designs
Visions Hair and Nail
Total
Percent uncollectible 2% 4% 10% 15% 35% 80%
Estimate of uncollectible accounts

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 $1,640 before adjustment on December 31, 20Y1. 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?

On the balance sheet, assets would be 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.

Check My Work

  • Previous

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Eco Management And Audit Scheme

Authors: Gerardus Blokdyk

3rd Edition

0655169709, 978-0655169703

More Books

Students also viewed these Accounting questions