Miller Wigs Company supplies wigs and hair care products to beauty salons throughout California and the Pacific Northwest. The accounts receivable clerk for Miller Wigs prepared the following partially completed aging-of-receivables schedule as of the end of business on December 31, 2007:
|
Customer
|
Balance
|
Not Past Due
|
Days Past Due
|
|
1-30
|
31-60
|
61-90
|
91-120
|
Over 120
|
|
Daytime Beauty
|
$20,000
|
$20,000
|
|
|
|
|
|
| Blount Wigs |
$11,000 |
|
|
$11,000 |
|
|
|
| Zabka's |
2,900 |
|
2,900 |
|
|
|
|
| Subtotals |
780,000 |
398,600 |
197,250 |
98,750 |
33,300 |
29,950 |
22,150 |
The following accounts were unintentionally omitted from the aging schedule:
|
Customer
|
Due Date
|
Balance
|
|
Houseal Uniquely Yours
|
July 1, 2007
|
$ 900
|
|
Country Designs
|
Aug. 2, 2007
|
4,000
|
|
Treat's
|
Sept. 9, 2007
|
1,200
|
|
Molina's Beauty Store
|
Sept. 29, 2007
|
1,100
|
|
Ginburg Supreme
|
Oct. 10, 2007
|
1,500
|
|
Steve's Hair Products
|
Oct. 17, 2007
|
600
|
|
Hairy's Hair Care
|
Oct. 31, 2007
|
2,000
|
|
VanDiver's Images
|
Nov. 18, 2007
|
700
|
|
Lopez Hair Styling
|
Nov. 28, 2007
|
1,800
|
|
Josset Ritz
|
Nov. 30, 2007
|
3,500
|
|
Cool Designs
|
Dec. 1, 2007
|
1,000
|
|
Buttram Images
|
Jan. 3, 2008
|
6,200
|
Miller Wigs has a past history of uncollectible accounts by age category, as follows:
|
Age Class
|
Percentage Uncollectible
|
|
Not past due
|
2%
|
|
1-30 days past due
|
4
|
|
31-60 days past due
|
10
|
|
61-90 days past due
|
15
|
|
91-120 days past due
|
35
|
|
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.
3. Estimate the allowance for doubtful accounts, based on the aging-of-receivables schedule.
4. Assume that the allowance for doubtful accounts for Miller Wigs has a credit balance of $11,350 before adjustment on December 31, 2007. Illustrate the effect on the accounts and financial statements of the adjustment for uncollectible accounts.