90.2K

Verified Solution

Link Copied!

Aging of Receivabies; Estimating Allowance for Doubthul Accounts Wig Creations Company supplies wigs and hair care products to beauty salons throughout Texas and the 5 outhwest. The accounts recelvable derk for wig Creations prepared the following partially completed aging of receivables schedule as of the end of business on December 31,20 i. 1 : The following accounts were unintentionally emitted from the aging schedule: Wig Creations has a past history of uncollectible accounts by age category, as follows: 1. Determine the number of days past due for each of the preceding accounts. If an account is not past due, enter a zero. 2. Compiete the aging of receivabies schedule by adding the omitted accounts to the boktom of the schedule and updating the totais. If an amounk box does not require an entry, leave it blank. 3. Estimate the allowance for doubtful accounts, based on the aging of receivabies schedule, Festast * Check My Wor Count the number of days after the due dake up to Docember 31 . Do not indude the due dale in your count Aemember that not all moctiss have an equal number of days Add the accounta into the aging schedule based on their number of days past due. Apply the respective uncollectile percentage to the tocal receivades in eoch days past due group and the nat pamt due group. The amount of bad debt expense is affected by the balance in the allowancelccount. Consider the effects of a contra asset not being recorded in terms of the balance sheot 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 $1,450 before adjustment on December 31 , 20y1. Joumaize the adjustment for uncollectible accounts. Feedoack F Greck My Woik Count the number of days afier the due dale up to December 21 . Do not inctode the due date in your count Remechber that not al months fave an pqual number of days. Add the accounts inte the aging schedule based on their number of days past dve Apply the respective uncolectbie percentage to the todal recevabies in each days past due group and the not past die group. 5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income staternent? On the balance sheet, assets would be by because the alldwance for doubtful accounts would be . In addition, the owner's capital account would be by because bad debt expense would be and net income by on the income statemant

Answer & Explanation Solved by verified expert

See Answer