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	15,000		15,000
Angel Wigs	8,000						8,000
Zodiac Beauty	3,000				3,000
Subtotals	875,000		415,000		210,000		112,000		55,000		18,000		65,000

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

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

Feedback

Count the number of days after the due date up to December 31. Do not include the due date in your count. Remember that not all months have an equal number of days.

Learning Objective 4.

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	$15,000	$15,000
Angel Wigs	8,000			8,000
Zodiac Beauty	3,000		3,000
Subtotals	875,000	415,000	210,000	112,000	55,000	18,000	65,000
Arcade Beauty
Creative Images
Excel Hair Products
First Class Hair Care
Golden Images
Oh That Hair
One Stop Hair Designs
Visions Hair and Nail
Totals
Percent uncollectible (%)		%	%	%	%	%	%
Estimate of uncollectible accounts	$	$	$	$	$	$	$

Feedback

Add the accounts into the aging schedule based on their number of days past due.

Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group.

Learning Objective 4.

3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
$

Feedback

Add the accounts into the aging schedule based on their number of days past due.

Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group.

Learning Objective 4.

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.

Dec. 31	Bad Debt Expense
	Allowance for Doubtful Accounts

Feedback

The amount of bad debt expense is affected by the balance in the allowance account.

Learning Objective 4.

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.

Feedback

Consider the effects of a contra asset not being recorded in terms of the balance sheet equation.

Consider the effects of an expense not being reported in terms of the income equation.

Learning Objective 4.

Answer rating: 100% (QA)

1 Determine the number of days past due for each of the given accounts Customer Ar... View the full answer