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 869,900 482,800 208,800 95,700 32,200 28,700 21,700 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 That Hair Nov. 29, 2011 3,300 One Stop Hair Designs Dec. 2, 20Y1 2,100 Visions Hair & Nail Jan. 5, 20Y2 7,100 Wig Creations has a past history of uncollectible accounts by age category, as follows: Percent Uncollectible 1 % 3 Age Class Not past due 1-30 days past due 31-60 days past due 61-90 days past due 91-120 days past due 10 15 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 217 days Creative Images Sept. 7, 20Y1 115 days Excel Hair Products Oct. 17, 20Y1 75 days First Class Hair Care Oct. 24, 20Y1 68 days Golden Images Nov. 23, 2011 38 days Oh That Hair Nov. 29, 20Y1 32 days One Stop Hair Designs Dec. 2, 20Y1 29 days Visions Hair & Nail Jan. 5, 2012 0 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, 2011 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 Customer Balance 869,900 Subtotals 2,800 2,800 Arcade Beauty Creative Images 5,800 5,800 Excel Hair Products 800 800 First Class Hair Care 1,900 1,900 Golden Images 600 600 Oh That Hair 3,300 3,300 One Stop Hair Designs 2,100 2,100 Visions Hair & Nail 7,100 7,100 Total 894,300 24,400 x 2,100 X 3,900 X 2,700 X 5,800 X 2,800 X Percent uncollectible 1% 3% 10% 15% 35% 80% Estimate of uncollectible accounts 24,400 x 71 X 2,100 X 3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule. Feedback Check My Work 4. Assume that the allowance for doubtful accounts for Wig Creations has a credit balance of $1,650 before adjustment on December 31, 20Y1. Journalize the adjustment for uncollectible accounts. If an amount box does not require an entry, leave it blank. Feedback Check My Work 5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement? by by In On the balance sheet, assets would be addition, the owner's capital account would be on the income statement. because the allowance for doubtful accounts would be because bad debt expense would be by and net income by