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, 20Y1:

The following accounts were unintentionally omitted from the aging schedule:

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

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, 20Y1. Journalize the adjustment for uncollectible accounts.

5. Assuming that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

Transcribed Image Text:

ember 31, 20YI: 1: G A B C Days Past Due Not Past 1-30 31-60 61-90 91-120 Over 120 Customer 4 ABC Beauty 5 Angel Wigs Balance 15,000 8,000 Due 15,000 8,000 3,000 30 Zodiac Beauty 31 Subtotals 32 3,000 875,000 415,000 210,000 112,000 55,000 18,000 65,000 23