PR 8-2B Aging of receivables; estimating allowance for doubtful accounts Obj. 4 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 par- tially completed aging of receivables schedule as of the end of business on December 31, 20Y7: A B D E F G H 1 Not Days Past Due 2 Past 3 Customer Balance Due 1-30 31-60 61-90 91-120 Over 120 4 ABC Beauty 15,000 15,000 5 Angel Wigs 8,000 8,000 30 Zodiac Beauty 31 Subtotals 3,000 3,000 875,000 415,000 210,000 112.000 55,000 18,000 65.000 7,500 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 $10,000 Creative Images Oct. 30 8,500 Excel Hair Products July 3 First Class Hair Care Sept. 8 6,600 Golden Images Nov. 23 3,600 Oh That Hair Nov. 29 1,400 One Stop Hair Designs Dec 7 4,000 Visions Hair & Nail Jan. 11 9,000 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 4 31-60 days past due 16 61-90 days past due 25 91-120 days past due 40 Over 120 days past due 80 Instructions 1. Determine the number of days past due for each of the preceding accounts. 2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals. 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 $7,375 before adjustment on December 31. 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? D E F G H Problem 8-2B Name: Section: Score: 0% Key Code: [Key code here) Instructions Answers are entered in the cells with gray backgrounds. Cells with non-gray backgrounds are protected and cannot be edited. An asterisk (*) will appear to the right of an incorrect entry. Enter a zero in cells you would otherwise leave blank Number of Days Past Due Customer Due Date Arcade Beauty Creative Images Excel Hair Products First Class Hair Care Golden Images Oh That Hair One Stop Hair Designs Visions Hair & Nail 1 2 3 4 5 26 27 August 17 October 30 July 3 September 8 November 23 November 29 December 7 January 11 2 Pr. 8-2B ALB nes Aging of Receivables Schedule December 31, 2017 Days Past Due Not Past Due Customer Over 120 Balance 31-60 61 - 90 91 - 120 $ $ 15.000 ABC Beauty Angel Wigs 15.000 3.000 $ 8,000 3.000 $ 210.000 $415.000 $112.000 $ 55,000 $ 18.000 $ 65.000 Zodiac Beauty Subtotes Arcade Beauty Creative Images Excel Hair Products First Class Hair Care Golden Images Oh That Hair One Stop Hair ons Vision Hair & Nail Total Porcon uncollectie Estimate of uncollectible accounts 3.000 $ 875 000 10,000 8,500 7.500 5.600 3.000 14400 4,000 9000 $ 925 600 Pr. 8.25 4. 5. On the balance sheet, the omission would cause: assets to be by retained earnings to be by On the income statement, the omission would cause: IT expenses to be by net income to be by
