Use the information below to answer the questions that follow.

Wiggins Corporation utilizes an accounting software package that is capable of producing a detailed aging of outstanding accounts receivable.Following is the aging schedule as of December 31, 2022.

AGE AMOUNT OUTSTANDING 0 to 30 days $1,200,000

31 to 60 days 700,000 61 to 120 days 200,000 Over 120 days 25,000

Casper Wiggins has owned and operated Wiggins Corporation for many years and has a very good sense of the probability of collection of outstanding receivables, based on an aging analysis.The following table reveals the likelihood of collection:

AGE PROBABILITY OF COLLECTION 0 to 30 days 98% 31 to 60 days 90% 61 to 120 days 75% Over 120 days 50%

(a) Prepare aging analysis, and show how accounts receivable and the related allowance for uncollectibles should appear on the balance sheet at December 31. (5 points)

(b) Prepare the necessary journal entry to update the allowance for uncollectibles, assuming the balance prior to preparing the aging was a $15,000 credit. (2.5 points)

(c) Prepare the necessary journal entry to update the allowance for uncollectibles, assuming the balance prior to preparing the aging was a $5,000 debit.(2.5 points)

(d) Assume one of Wiggins customers has filed for banruptcy protection. Prepare the journal entry to write off the account, $21,000. (2.5 points)

(e) Explain why the actual write-off will not result in a reduction of Wang Corporation's income. (2.5 points)

(f) Wiggins accepts credit card payments from customers. Charges on USExpress cards were $3,000.This card is not a bank (debit) card, and settlement does not occur until approximately two weeks following the date of the transaction.USExpress charges a 4% fee, and this amount is recorded on the day of sale. Prepare the journal entry for the credit card sales. (3.5 points)

(g) Prepare the journal entry for the eventual collection of the USExpress charges. (2.5 points)

Include memo entries for all journal entries!

Answers: B-07.05 (a)

(a)

AGE BALANCE ESTIMATED % UNCOLLECTIBLE ESTIMATED AMOUNT UNCOLLECTIBLE 0 to 30 days $1,200,000 98% $24,000 31 to 60 days 700,000 90% $ 70,000 61 to 120 days 200,000 75% $ 50,000 Over 120 days 25,000 50% $12,500

$ 2,125,000 $156,500

Accounts Receivable $2,125,000

Less:Allowance for Uncollectible Accounts (156,500)

Accounts Receivable Net $1,968,500

(b) GENERAL JOURNAL

Date Accounts Debit / Credit

Dec. 31 Uncollected Accounts Expense $141,500 Debit

Allowance of Uncollected Accounts $141,500 Credit

Memo: To adjust allowance account from $15,000 credit balance to the target balance of $156,500

(c) GENERAL JOURNAL

Date Accounts Debit / Credit

Dec. 31 Uncollected Accounts Expense $161,500 Debit

Allowance of Uncollected Accounts $161,500 Credit

Memo: To adjust allowance account from $5,000 debit balance to the target balance of $156,500 credit

(d) GENERAL JOURNAL

Date Accounts Debit / Credit

Dec. 31 Uncollected Accounts Expense $21,000 Debit

Allowance of Uncollected Accounts $21,000 Credit

Memo: To record the write off of an uncollectible account of Wiggins

(e) Explain why the actual write-off will not result in a reduction of Wang Corporation's income

(f) GENERAL JOURNAL

Date Accounts Debit / Credit

Dec. 31 $ Debit

$ Credit

Memo:

(g) GENERAL JOURNAL

Date Accounts Debit / Credit

Dec. 31 $ Debit

$ Credit

Memo: