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, 20Y1 days Creative Images Oct. 30, 20Y1 days Excel Hair Products July 3, 20Y1 days First Class Hair Care Sept. 8, 20Y1 days Golden Images Nov. 23, 20Y1 days Oh That Hair Nov. 29, 20Y1 days One Stop Hair Designs Dec. 7, 20Y1 days Visions Hair & Nail Jan. 11, 20Y2 days 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, 20Y1 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 Subtotals Arcade Beauty Creative Images Excel Hair Products First Class Hair Care Golden Images Oh That Hair One Stop Hair Designs Visions Hair and Nail Total Percent uncollectible 1% 4% 16% 25% 40% 80% Estimate of uncollectible accounts Feedback 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. If an amount box does not require an entry, leave it blank. 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 overstated by because the allowance for doubtful accounts would be by . In addition, the owner’s capital account would be by because bad debt expense would be and net income by on the income statement
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Aging of Receivables; Estimating Allowance for Doubtful Accounts
Wig Creations Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest. The
| Not | Days Past Due | |||||||||||||
| Past | Over | |||||||||||||
| Customer | Balance | Due | 1-30 | 31-60 | 61-90 | 91-120 | 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:
| Customer | Due Date | Balance | ||
| Arcade Beauty | Aug. 17, 20Y1 | $10,000 | ||
| Creative Images | Oct. 30, 20Y1 | 8,500 | ||
| Excel Hair Products | July 3, 20Y1 | 7,500 | ||
| First Class Hair Care | Sept. 8, 20Y1 | 6,600 | ||
| Golden Images | Nov. 23, 20Y1 | 3,600 | ||
| Oh That Hair | Nov. 29, 20Y1 | 1,400 | ||
| One Stop Hair Designs | Dec. 7, 20Y1 | 4,000 | ||
| Visions Hair & Nail | Jan. 11, 20Y2 | 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, 20Y1 | days |
| Creative Images | Oct. 30, 20Y1 | days |
| Excel Hair Products | July 3, 20Y1 | days |
| First Class Hair Care | Sept. 8, 20Y1 | days |
| Golden Images | Nov. 23, 20Y1 | days |
| Oh That Hair | Nov. 29, 20Y1 | days |
| One Stop Hair Designs | Dec. 7, 20Y1 | days |
| Visions Hair & Nail | Jan. 11, 20Y2 | days |
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, 20Y1 | |||||||
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 | |||||||
| Subtotals | |||||||
| Arcade Beauty | |||||||
| Creative Images | |||||||
| Excel Hair Products | |||||||
| First Class Hair Care | |||||||
| Golden Images | |||||||
| Oh That Hair | |||||||
| One Stop Hair Designs | |||||||
| Visions Hair and Nail | |||||||
| Total | |||||||
| Percent uncollectible | 1% | 4% | 16% | 25% | 40% | 80% | |
| Estimate of uncollectible accounts |
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. If an amount box does not require an entry, leave it blank.
5. Assume that the
On the balance sheet, assets would be overstated by because the allowance for doubtful accounts would be by . In addition, the owner’s capital account would be by because
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