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 $31,20$Y$7$:

Not Days Past Due

Past

Customer Balance Due $1-3031-6061-9091-120$ Over $120$

ABC Beauty $15,00015,000$

Angel Wigs $8,0008,000$

Zodiac Beauty $3,0003,000$

Subtotals $875,000415,000210,000112,00055,00018,00065,000$

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. $1710,000$

Creative Images Oct. $308,500$

Excel Hair Products July $37,500$

First Class Hair Care Sept. $86,600$

Golden Images Nov. $233,600$

Oh That Hair Nov. $291,400$

One Stop Hair Designs Dec. $74,000$

Visions Hair & Nail Jan. $119,000$

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 $80$Determine the number of days past due for each of the preceding accounts. If an account is not past due, enter a zero.

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.

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

Dec. $31$

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 $

on the income statement.