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, 20Y7: Not Days Past Due Past Customer Balance Due 1-30 31-60 61-90 91-120 Over 120 ABC Beauty 19,000 19,000 Angel Wigs 7,800 7,800 Zodiac Beauty 3,900 3,900 Subtotals 1,275,800 741,100 283,000 114,200 37,100 22,800 77,600 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 $5,300 Creative Images Oct. 30 5,300 Excel Hair Products July 3 7,900 7,200 First Class Hair Care Sept. 8 Golden Images Nov. 23 4,000 Oh That Hair Nov. 29 2,300 One Stop Hair Designs Dec. 7 6,400 Visions Hair & Nail Jan. 11 4,000 Wig Creations has a past history of uncollectible accounts by age category, as follows: Percent Age Class Uncollectible Not past due 1 % 1-30 days past due 31-60 days past due 61-90 days past due 91-120 days past due Over 120 days past due 3 11 31 39 76 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 Nov. 23 days Golden Images Oh That Hair Nov. 29 days One Stop Hair Designs Dec. 7 days Visions Hair & Nail Jan. 11 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, 2017 Not Past Days Past Days Past Due 1-30 Due 31-60 Days Past Due 61-90 Days Past Due 91-120 Days Past Due Over 120 Balance Due Customer 19,000 ABC Beauty Angel Wigs Zodiac Beauty Subtotals 19,000 7,800 3,900 7,800 3,900 283,000 1,275,800 741,100 114,200 37,100 22,800 77,600 Arcade Beauty Creative Images Excel Hair Products First Class Hair Care Golden Images Oh That Hair One Stop Hair Designs Visions Hair & Nail Totals Percent uncollectible (%) % % % % % % 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 $3,800 before adjustment on December 31, 2017. Journalize the adjustment for uncollectible accounts. If an amount box does not require an entry, leave it blank. Dec. 31 5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement? by $ by $ On the balance sheet, assets would be (retained earnings) would be because the allowance for doubtful accounts would be because bad debt expense would be and net income In addition, the stockholders' equity on the income statement. by $ by $
