1. Aging of Receivables; Estimating The contra asset account for accounts receivable.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	891,600	494,800	214,000	98,100	33,000	29,400	22,300

   The following accounts were unintentionally omitted from the aging schedule:

   Customer	Due Date		Balance
   Arcade Beauty		May 28, 20Y1	$3,200
   Creative Images		Sept. 7, 20Y1	6,700
   Excel Hair Products		Oct. 17, 20Y1	900
   First Class Hair Care		Oct. 24, 20Y1	2,200
   Golden Images		Nov. 23, 20Y1	700
   Oh The Hair		Nov. 29, 20Y1	3,900
   One Stop Hair Designs		Dec. 2, 20Y1	2,500
   Visions Hair and Nail		Jan. 5, 20Y2	8,200

   Wig Creations has a past history of uncollectible accounts by age category, as follows:

   Age Class	Percent Uncollectible
   Not past due	2	%
   1-30 days past due	4
   31-60 days past due	10
   61-90 days past due	15
   91-120 days past due	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	days
   Creative Images	Sept. 7, 20Y1	days
   Excel Hair Products	Oct. 17, 20Y1	days
   First Class Hair Care	Oct. 24, 20Y1	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

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   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
   Customer	Balance	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
   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
   Percent uncollectible		2%	4%	10%	15%	35%	80%
   Estimate of uncollectible accounts

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

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   4. Assume that the allowance for doubtful accounts for Wig Creations has a credit balance of $1,550 before adjustment on December 31, 20Y1. Journalize the adjustment for uncollectible accounts.

   	Accounts Payable Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense Cash Sales
   	Accounts Payable Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense Cash Sales

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   5. 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

   • overstated
   • understated
   by
   • $67,440
   • $65,890
   • $65,900
   because the allowance for doubtful accounts would be
   • overstated
   • understated
   by
   • $67,440
   • $65,890
   • $65,900
   . In addition, the owners capital account would be
   • overstated
   • understated
   by
   • $67,440
   • $65,890
   • $65,900
   because bad debt expense would be
   • overstated
   • understated
   and net income
   • overstated
   • understated
   by
   • $67,440
   • $65,890
   • $65,900
   on the income statement.