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, 2011: Days Past Due Customer Balance Not Past Due 1- 30 3 1-60 61-90 Subtotals 866,800 481,100 208,000 95,300 32,100 The following accounts were unintentionally omitted from the aging schedule: 91-120 28,600 over 120 21,700 Customer Due Date Balance Arcade Beauty May 28, 2011 $3,000 Creative Images Sept. 7, 2011 6,300 Excel Hair Products Oct. 17, 2011 800 First Class Hair Care Oct 24, 2011 2,100 Golden Images Nov. 23, 2011 700 Oh The Hair Nov. 29, 2011 3,600 One Stop Hair Designs Dec. 2, 2011 2,300 Visions Hair and Nail Jan 5, 20Y2 7,700 Wig Creations has a past history of uncollectible accounts by age category, as follows: Age Class Percent Uncollectible 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, 201 days Creative Images Sept. 7, 2011 days Excel Hair Products Oct. 17, 2011 Oct. 24, 2011 First Class Hair Care days days days Golden Images Nov. 23, 2011 Oh The Hair days Nov. 29, 20Y1 Dec. 2, 2041 days One Stop Hair Designs inne usiend Nail TV Visions Hair and Nail Jan 5, 2012 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 Days Past Due 31 Days Past Due 61 Days Past Due 91- Days Past Due Over Customer Subtotals Arcade Beauty Creative Images Excel Hair Products 11111 First Class Hair Care IIIIIIIII Golden Images Oh The Hair One Stop Hair Designs Calculator One Stop Hair Designs Visions Hair and Nail Total 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 $1,620 before adjustment on December 31, 2011. Journalize the adjustment for uncollectible accounts. Bad Debt Expense Allowance for Doubtful 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 overstated because the allowance for doubtful accounts would be overstated by In addition, the owner's capital account would be overstated by because bad debt expense would be overstated and net income overstated by on the income statement
