Question: Wiggins Corporation utilizes an accounting software package that is capable of producing a detailed aging of outstanding accounts receivable.Following is the aging schedule as of
Wiggins Corporation utilizes an accounting software package that is capable of producing a detailed aging of outstanding accounts receivable.Following is the aging schedule as of December 31, 2022.
AGE
AMOUNT OUTSTANDING
0 to 30 days
$1,200,000
31 to 60 days
700,000
61 to 120 days
200,000
Over 120 days
25,000
Casper Wiggins has owned and operated Wiggins Corporation for many years and has a very good sense of the probability of collection of outstanding receivables, based on an aging analysis.The following table reveals the likelihood of collection:
AGE
PROBABILITY OF COLLECTION
0 to 30 days
98%
31 to 60 days
90%
61 to 120 days
75%
Over 120 days
50%
QUESTIONS:
(d)Assume one of Wiggins customers has filed for banruptcy protection. Prepare the journal entry to write off the account, $21,000(2.5 points)
(e)Explain why the actual write-off will not result in a reduction of Wang Corporation's income. (2.5 points)
(f)Wiggins accepts credit card payments from customers. Charges on USExpress cards were $3,000.This card is not a bank (debit) card, and settlement does not occur until approximately two weeks following the date of the transaction.USExpress charges a 4% fee, and this amount is recorded on the day of sale. Prepare the journal entry for the credit card sales. (3.5 points)
(g)Prepare the journal entry for the eventual collection of the USExpress charges. (2.5 points)
Include memo entries for all journal entries!
(b)
GENERAL JOURNAL
Date
Accounts
Debit
Credit
Dec. 31
Uncollected Accounts Expense
141,500
Allowance of Uncollected Accounts
141,500
To adjust allowance account from $15,000 credit balance to the target balance of $156,500
(c)
GENERAL JOURNAL
Date
Accounts
Debit
Credit
Dec. 31
Uncollectible Accounts Expense
161,500
Allowance for Uncollectible Accounts
161,500
To adjust the allowance account from $5,000 debit balance to the target balance of $156,500 credit
(d)
GENERAL JOURNAL
Date
Accounts
Debit
Credit
Dec. 31
21,000
21,000
(e)
(f)
GENERAL JOURNAL
Date
Accounts
Debit
Credit
Dec. 31
(g)
GENERAL JOURNAL
Date
Accounts
Debit
Credit
Dec. 31
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