Strut Creations Company, Inc., supplies wigs and hair care products to beauty salons throughout Colorado, Wyoming, Nevada, Idaho, Oregon, Washington, and California. The accounts receivable clerk for Strut Creations Company, Inc., prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 2019.
Not Past Due
Customer Balance Due
1 to 39
31 to 60
61 to 90
91 to 120
> than 120
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. 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 17-Aug 10,000
Creative Images 30-Oct 8,500
Excel Hair Products 3-Jul 7,500
First Class Hair Care 8-Sep 6,600
Golden Images 23-Nov 3,600
Oh that Hair 29-Nov 1,400
One Stop Hair Designs 7-Dec 4,000
Visions Hair & Nail 11-Jan 9,000
Percent Uncollectible
Age Class
Not past due 1 to 30 past 31 to 60 past 61 to 90 past 91 to 120 past > 120 past
1% 4% 16% 25% 40% 80%
Required:
1. Determine the number of days past due for each of the preceding accounts.
2. Complete the aging of receivable schedule by adding the omitted accounts to the bottom of the schedule and updating the totals.
3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
4. Assume that the allowance for doubtful accounts for Strut Creations Company has a credit balance of $7,375 before adjustment on December 31. Journalize the adjustment for uncollectible accounts.
5. Assume that the adjusting entry in [4] was inadvertently omitted, how would the omission affect the balance sheet and income statement?
