Question

In: Accounting

Aging of Receivables; Estimating Allowance for Doubtful Accounts Wig Creations Company supplies wigs and hair care...

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 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:

Days Past Due
Customer Balance Not Past Due 1-30 31-60 61-90 91-120 Over 120
Subtotals 907,000 503,300 217,700 99,800 33,600 29,900 22,700

The following accounts were unintentionally omitted from the aging schedule:

Customer Due Date Balance
Arcade Beauty May 28, 20Y1 $2,800
Creative Images Sept. 7, 20Y1 5,900
Excel Hair Products Oct. 17, 20Y1 800
First Class Hair Care Oct. 24, 20Y1 1,900
Golden Images Nov. 23, 20Y1 600
Oh That Hair Nov. 29, 20Y1 3,400
One Stop Hair Designs Dec. 2, 20Y1 2,200
Visions Hair & Nail Jan. 5, 20Y2 7,200

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


Age Class
Percent
Uncollectible
Not past due 2 %
1-30 days past due 4
31-60 days past due 12
61-90 days past due 18
91-120 days past due 40
Over 120 days past due 75

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 May 28, 20Y1 fill in the blank 1f4b5bfff06e00e_1 days
Creative Images Sept. 7, 20Y1 fill in the blank 1f4b5bfff06e00e_2 days
Excel Hair Products Oct. 17, 20Y1 fill in the blank 1f4b5bfff06e00e_3 days
First Class Hair Care Oct. 24, 20Y1 fill in the blank 1f4b5bfff06e00e_4 days
Golden Images Nov. 23, 20Y1 fill in the blank 1f4b5bfff06e00e_5 days
Oh That Hair Nov. 29, 20Y1 fill in the blank 1f4b5bfff06e00e_6 days
One Stop Hair Designs Dec. 2, 20Y1 fill in the blank 1f4b5bfff06e00e_7 days
Visions Hair & Nail Jan. 5, 20Y2 fill in the blank 1f4b5bfff06e00e_8 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.

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.

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

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.

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
Subtotals fill in the blank a76dce09bf8d072_1 fill in the blank a76dce09bf8d072_2 fill in the blank a76dce09bf8d072_3 fill in the blank a76dce09bf8d072_4 fill in the blank a76dce09bf8d072_5 fill in the blank a76dce09bf8d072_6 fill in the blank a76dce09bf8d072_7
Arcade Beauty fill in the blank a76dce09bf8d072_8 fill in the blank a76dce09bf8d072_9 fill in the blank a76dce09bf8d072_10 fill in the blank a76dce09bf8d072_11 fill in the blank a76dce09bf8d072_12 fill in the blank a76dce09bf8d072_13 fill in the blank a76dce09bf8d072_14
Creative Images fill in the blank a76dce09bf8d072_15 fill in the blank a76dce09bf8d072_16 fill in the blank a76dce09bf8d072_17 fill in the blank a76dce09bf8d072_18 fill in the blank a76dce09bf8d072_19 fill in the blank a76dce09bf8d072_20 fill in the blank a76dce09bf8d072_21
Excel Hair Products fill in the blank a76dce09bf8d072_22 fill in the blank a76dce09bf8d072_23 fill in the blank a76dce09bf8d072_24 fill in the blank a76dce09bf8d072_25 fill in the blank a76dce09bf8d072_26 fill in the blank a76dce09bf8d072_27 fill in the blank a76dce09bf8d072_28
First Class Hair Care fill in the blank a76dce09bf8d072_29 fill in the blank a76dce09bf8d072_30 fill in the blank a76dce09bf8d072_31 fill in the blank a76dce09bf8d072_32 fill in the blank a76dce09bf8d072_33 fill in the blank a76dce09bf8d072_34 fill in the blank a76dce09bf8d072_35
Golden Images fill in the blank a76dce09bf8d072_36 fill in the blank a76dce09bf8d072_37 fill in the blank a76dce09bf8d072_38 fill in the blank a76dce09bf8d072_39 fill in the blank a76dce09bf8d072_40 fill in the blank a76dce09bf8d072_41 fill in the blank a76dce09bf8d072_42
Oh That Hair fill in the blank a76dce09bf8d072_43 fill in the blank a76dce09bf8d072_44 fill in the blank a76dce09bf8d072_45 fill in the blank a76dce09bf8d072_46 fill in the blank a76dce09bf8d072_47 fill in the blank a76dce09bf8d072_48 fill in the blank a76dce09bf8d072_49
One Stop Hair Designs fill in the blank a76dce09bf8d072_50 fill in the blank a76dce09bf8d072_51 fill in the blank a76dce09bf8d072_52 fill in the blank a76dce09bf8d072_53 fill in the blank a76dce09bf8d072_54 fill in the blank a76dce09bf8d072_55 fill in the blank a76dce09bf8d072_56
Visions Hair & Nail fill in the blank a76dce09bf8d072_57 fill in the blank a76dce09bf8d072_58 fill in the blank a76dce09bf8d072_59 fill in the blank a76dce09bf8d072_60 fill in the blank a76dce09bf8d072_61 fill in the blank a76dce09bf8d072_62 fill in the blank a76dce09bf8d072_63
Total fill in the blank a76dce09bf8d072_64 fill in the blank a76dce09bf8d072_65 fill in the blank a76dce09bf8d072_66 fill in the blank a76dce09bf8d072_67 fill in the blank a76dce09bf8d072_68 fill in the blank a76dce09bf8d072_69 fill in the blank a76dce09bf8d072_70
Percent uncollectible 2% 4% 12% 18% 40% 75%
Estimate of uncollectible accounts fill in the blank a76dce09bf8d072_71 fill in the blank a76dce09bf8d072_72 fill in the blank a76dce09bf8d072_73 fill in the blank a76dce09bf8d072_74 fill in the blank a76dce09bf8d072_75 fill in the blank a76dce09bf8d072_76 fill in the blank a76dce09bf8d072_77

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.

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.

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

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.

3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
$fill in the blank b3e2effda050076_1

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.

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.

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

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.

4. Assume that the allowance for doubtful accounts for Wig Creations has a credit balance of $1,810 before adjustment on December 31, 20Y1. Journalize the adjustment for uncollectible accounts. If an amount box does not require an entry, leave it blank.

Bad Debt Expense fill in the blank a248e901103607e_2 fill in the blank a248e901103607e_3
Allowance for Doubtful Accounts fill in the blank a248e901103607e_5 fill in the blank a248e901103607e_6

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.

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.

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

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.

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 $69,631  because the allowance for doubtful accounts would be understated  by $69,631 . In addition, the owner’s capital account would be overstated  by $69,631  because bad debt expense would be understated  and net income overstated  by $69,631  on the income statement.

Solutions

Expert Solution

1.

Customer Due Date Number of Days Past Due
Arcade Beauty May 28, 20Y1 217 days
Creative Images Sept. 7, 20Y1 115 days
Excel Hair Products Oct. 17, 20Y1 75 days
First Class Hair Care Oct. 24, 20Y1 68 days
Golden Images Nov. 23, 20Y1 38 days
Oh The Hair Nov. 29, 20Y1 32 days
One Stop Hair Designs Dec. 2, 20Y1 29 days
Visions Hair and Nail Jan. 5, 20Y2 Not past due

2.

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
Subtotals $       907,000 $        503,300 $     217,700 $      99,800 $      33,600 $      29,900 $      22,700
Arcade Beauty $          2,800 $        2,800
Creative Images $          5,900 $        5,900
Excel Hair Products $             800 $           800
First Class Hair Care $          1,900 $        1,900
Golden Images $             600 $           600
Oh The Hair $          3,400 $        3,400
One Stop Hair Designs $          2,200 $        2,200
Visions Hair and Nail $          7,200 $           7,200
Total $       931,800 $        510,500 $     219,900 $     103,800 $      36,300 $      35,800 $      25,500
Percent uncollectible 2% 4% 12% 18% 40% 75%
Estimate of uncollectible accounts $        71,441 $         10,210 $        8,796 $      12,456 $        6,534 $      14,320 $      19,125


3.

Allowance for Doubtful Accounts = $71441

4.

Account Titles Debit Credit
Bad Debt Expense $           69,631
      Allowance for Doubtful Accounts $             69,631

Related Solutions

Aging of Receivables; Estimating Allowance for Doubtful Accounts Wig Creations Company supplies wigs and hair care...
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 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: Days Past Due Customer Balance Not Past Due 1-30 31-60 61-90 91-120 over 120 Subtotals 914,200 507,300 219,400 100,600 33,800 30,200 22,900 The following accounts were unintentionally omitted from...
Aging of Receivables; Estimating Allowance for Doubtful Accounts Wig Creations Company supplies wigs and hair care...
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 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: Days Past Due Customer Balance Not Past Due 1-30 31-60 61-90 91-120 over 120 Subtotals 690,900 383,400 165,800 76,000 25,600 22,800 17,300 The following accounts were unintentionally omitted from...
Aging of Receivables; Estimating Allowance for Doubtful Accounts Wig Creations Company supplies wigs and hair care...
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 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: Days Past Due Customer Balance Not Past Due 1-30 31-60 61-90 91-120 over 120 Subtotals 653,400 362,600 156,800 71,900 24,200 21,600 16,300 The following accounts were unintentionally omitted from...
Aging of Receivables; estimating allowance for doubtful accounts Aging of receivables; estimating allowance for doubtful accounts...
Aging of Receivables; estimating allowance for doubtful accounts Aging of receivables; estimating allowance for doubtful accounts Fishy Fish company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Fishy Fish prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 2015: A B C D E F G H 1 Not past Due Days Past Due 2 3 Customer Balance...
Wig Creations Company supplies wigs and hair care products to beauty salons throughout Texas and the...
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: Days Past Due Customer Balance Not Past Due 1-30 31-60 61-90 91-120 over 120 Subtotals 660,200 366,500 158,400 72,600 24,400 21,800 16,500 The following accounts were unintentionally omitted from the aging schedule: Customer Due Date Balance Arcade...
Aging of Receivables; Estimating Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear...
Aging of Receivables; Estimating Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear products to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Trophy Fish 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 AAA Outfitters 20,100 20,100 Brown Trout Fly Shop 8,000 8,000 Zigs Fish...
Aging of Receivables; Estimating Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear...
Aging of Receivables; Estimating Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear products to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Trophy Fish 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 AAA Outfitters 19,000 19,000 Brown Trout Fly Shop 7,000 7,000 Zigs Fish...
Aging of receivables; estimating allowance for doubtful accounts Trophy Fish Company supplies flies and fishing gear...
Aging of receivables; estimating allowance for doubtful accounts Trophy Fish Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Trophy Fish prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 20Y4: 1 Not Days Past Due Days Past Due Days Past Due Days Past Due Days Past Due 2 Past 3 Customer Balance Due 1-30 31-60 61-90 91-120...
Aging of Receivables; Estimating Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear...
Aging of Receivables; Estimating Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear products to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Trophy Fish 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 AAA Outfitters 19,600 19,600 Brown Trout Fly Shop 7,000 7,000 Zigs Fish...
Aging of Receivables; Estimating The contra asset account for accounts receivable.Allowance for Doubtful Accounts Trophy Fish...
Aging of Receivables; Estimating The contra asset account for accounts receivable.Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear products to sporting goods stores and outfitters throughout the western United States. The A claim against the customer created by selling merchandise or services on credit.accounts receivable clerk for Trophy Fish 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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT