In: Accounting
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.
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 |