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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. 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, 2017: Not Days Past Due Past Customer Balance Due 1-30 31-60 61-90 91-120 Over 120 ABC Beauty 19,800 19,800 Angel Wigs 7,900 7,900 Zodiac Beauty 4,400 4,400 Subtotals 1,298,000 758,000 287,400 119,500 36,400 15,500 81,200 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. 17 $5,400 Creative Images Oct. 30 5,200 Excel Hair Products July 3 8,800 First Class Hair Care Sept. 8 7,000 Golden Images Nov. 23 3,100 Oh That Hair Nov. 29 2,800 One Stop Hair Designs Dec. 7 6,500 Visions Hair & Nail Jan. 11 3,900 Wig Creations has a past history of uncollectible accounts by age category, as follows: Percent Age Class Uncollectible Not past due 1 % 1-30 days past due 3 31-60 days past due 8 61-90 days past due 29 91-120 days past due 38 Over 120 days past due 75 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 Aug. 17 days Creative Images Oct. 30 days Excel Hair Products July 3 days First Class Hair Care Sept. 8 days Golden Images Nov. 23 days Oh That Hair Nov. 29 days One Stop Hair Designs Dec. 7 days Visions Hair & Nail Jan. 11 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, 2017 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 Balance Customer 19,800 ABC Beauty Angel Wigs Zodiac Beauty 19,800 7,900 4,400 7,900 4,400 Subtotals 1,298,000 758,000 287,400 119,500 36,400 15,500 81,200 Arcade Beauty Creative Images Excel Hair Products First Class Hair Care Golden Images Oh That Hair One Stop Hair Designs Visions Hair & Nail Totals 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 $5,000 before adjustment on December 31, 2017. Journalize the adjustment for uncollectible accounts. If an amount box does not require an entry, leave it blank. Dec. 31 5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement? because the allowance for doubtful accounts would be by $ . In On the balance sheet, assets would be by $ addition, the stockholders' equity (retained earnings) would be on the income statement. by $ because bad debt expense would be and net income by $
