Question

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, 2017: Not Days Past Due Past Customer Balance Due 31-60 61-90 91-120 Over 120 ARC Beauty 20.100 20,100 Angel Wigs 7.500 7.800 Zodiac Beauty 3,700 Subtotals 1,308,700 757,000 283,900 125,300 41,000 24,200 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 $5.200 Creative Images 5.100 Excel Mar Products First Class Hair Care 6,600 Golden Images 3.500 Oh That Hair 2,000 One Stop Hair Designs Dec. 2 6,400 Visions Hair & Nail Jan. 11 4,500 Wie Creations has past history of uncollectible accounts by age category, as follows: " R

Answer 1

balance 136 PART 1 customer Arcade Beauty Creative Images Excel Hair Products First Class Hair Care Golden Images Oh That Hair One Stop Hair Designs Visions Hair & Nail due date Number of Days Past Due 5200 Aug-17 5100 Oct-30 8200 Jul-03 6600 Sep-08 3500 Nov-23 2800 Nov-29 6400 Dec-07 45001 Jan-11 PART 2 & 3 Aging schedule customer ABC Beauty Angel Wigs days past due not past due 1-30. 20,100 days past due days past due days past due days past due 31-60 61-90 91-120 over 120 balance 20,100 7,800 7,800 ------ 3,700 283,900 757,000 125,300 41,000 24,200 77,300 5,200 5, 100 8,200 Zodiac Beauty subtotal Arcade Beauty Creative Images Excel Hair Products First Class Hair Care Golden Images Oh That Hair One Stop Hair Designs Visions Hair & Nail totals Percent uncollectible Estimate of uncollectible accounts 3,700 1,308,700 5,200 5,100 8,200 6,600 3,500 2,800 6,400 4,500 1,351,000 6,600 3,500 2,800 6,400 4,500 761,500 1% 290,300 3% 8,709 131,600 11% 14,476 46, 100 32% 14,752 30,800 39% 12,012 90,700 80% 72,560 130,124 7,615

Part 4 date credit debit 126,024 DESCRIPTION Dec-31 Bad debts expense allowance for doubtful accounts (130124-4100) 126024 Part 5 On the balance sheet, the omission would cause: assets to be allowance for doubtful acounts would be retained earnings to be On the income statement bad debts Expense to be Net income to be overstated by Understated by overstated by 126,024 126,024 126,024 Understated by overstated by 126,024 126,024