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 partially completed aging of receivables schedule as of the end of business on December 31, 20Y7:
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
|
7,500
|
|
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:
|
Age Class
|
Percent 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?
Attachment:- Problem.xlsx