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, 20Y7: Not Days Past Due Past Customer Balance Due 1-30 31-60 61-90 91-120 Over 120 ABC Beauty 19,100 19,100 Angel Wigs 7,700 7,700 Zodiac Beauty 4,500 4,500 Subtotals 1,294,300 742,000 297,300 121,100 42,400 16,100 75,400 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 $5,300 Creative Images Oct. 30 5,200 Excel Hair Products July 3 7,900 First Class Hair Care Sept. 8 7,100 Golden Images Nov. 23 3,700 Oh That Hair Nov. 29 2,600 One Stop Hair Designs Dec. 7 6,900 Visions Hair & Nail Jan. 11 4,800 Wig Creations has a past history of uncollectible accounts by age category, as follows: Age Class Percent 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 40 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 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, 20Y7 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 ABC Beauty 19,100 19,100 Angel Wigs 7,700 7,700 Zodiac Beauty 4,500 4,500 Subtotals 1,294,300 742,000 297,300 121,100 42,400 16,100 75,400 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 $3,900 before adjustment on December 31, 20Y7. 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? On the balance sheet, assets would be by $ because the allowance for doubtful accounts would be by $. In addition, the stockholders

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, 20Y7: Not Days Past Due Past Customer Balance Due 1-30 31-60 61-90 91-120 Over 120 ABC Beauty 19,100 19,100 Angel Wigs 7,700 7,700 Zodiac Beauty 4,500 4,500 Subtotals 1,294,300 742,000 297,300 121,100 42,400 16,100 75,400 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 $5,300 Creative Images Oct. 30 5,200 Excel Hair Products July 3 7,900 First Class Hair Care Sept. 8 7,100 Golden Images Nov. 23 3,700 Oh That Hair Nov. 29 2,600 One Stop Hair Designs Dec. 7 6,900 Visions Hair & Nail Jan. 11 4,800 Wig Creations has a past history of uncollectible accounts by age category, as follows: Age Class Percent 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 40 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 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, 20Y7 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 ABC Beauty 19,100 19,100 Angel Wigs 7,700 7,700 Zodiac Beauty 4,500 4,500 Subtotals 1,294,300 742,000 297,300 121,100 42,400 16,100 75,400 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 $3,900 before adjustment on December 31, 20Y7. 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? On the balance sheet, assets would be by $ because the allowance for doubtful accounts would be by $. In addition, the stockholders

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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, 20Y7:

		Not	Days Past Due
		Past
Customer	Balance	Due	1-30	31-60	61-90	91-120	Over 120
ABC Beauty	19,100		19,100
Angel Wigs	7,700						7,700

Zodiac Beauty	4,500				4,500
Subtotals	1,294,300		742,000		297,300		121,100	42,400	16,100	75,400

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	$5,300
Creative Images		Oct. 30	5,200
Excel Hair Products		July 3	7,900
First Class Hair Care		Sept. 8	7,100
Golden Images		Nov. 23	3,700
Oh That Hair		Nov. 29	2,600
One Stop Hair Designs		Dec. 7	6,900
Visions Hair & Nail		Jan. 11	4,800

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

Age Class	Percent 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	40
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	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, 20Y7
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
ABC Beauty	19,100	19,100
Angel Wigs	7,700			7,700
Zodiac Beauty	4,500		4,500
Subtotals	1,294,300	742,000	297,300	121,100	42,400	16,100	75,400
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 $3,900 before adjustment on December 31, 20Y7. 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?

On the balance sheet, assets would be by $ because the allowance for doubtful accounts would be by $. In addition, the stockholders’ equity (retained earnings) would be by $ because bad debt expense would be and net income by $ on the income statement.

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