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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
| 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, 20X2. | |||||
| 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 an aging analysis, and show how accounts receivable and the related allowance for uncollectibles should appear on the balance sheet at December 31. | ||||
| (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. | ||||
| (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. How could the allowance account have contained a debit balance?
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