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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 3 1-60 6 1-90 91-120 Subtotals 867,900 481,700 208,300 9 5,500 32,100 28,600 The following accounts were unintentionally omitted from the aging schedule: over 120 21,700 Customer Due Date Balance $2,500 Arcade Beauty Creative Images Excel Hair Products 5,200 May 28, 20Y1 Sept. 7, 2011 Oct. 17, 2081 Oct. 24, 2011 Nov. 23, 2011 700 First Class Hair Care 1,700 600 Golden Images Oh The Hair Nov. 29, 20Y1 3,000 One Stop Hair Designs Dec. 2, 2011 1,900 Visions Hair and Nail Jan. 5, 20Y2 6,400 Wig Creations has a past history of uncollectible accounts by age category, as follows: Age Class Percent Uncollectible Not past due 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 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, 2011 days Creative Images Sept. 7, 2071 days Excel Hair Products Oct. 17, 2011 days First Class Hair Care Oct. 24, 2011 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 Days Past Due 1- Days Past Due 31- Days Past Due 61- Days Past Due 91 - Days Past Due Over Customer Balance Not Past Due 60 120 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 18% Percent uncollectible Estimate of uncollectible accounts 190 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 $1,590 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? by On the balance sheet, assets would be by bad debt expense would be because the allowance for doubtful accounts would be . In addition, the owner's capital account would be by and net income by on the income statement. because
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