Natural Hair Company supplies wigs and hair care

products to
Natural Hair Company supplies wigs and hair care products to beauty salons throughout Texas
and the Southwest. The accounts receivable clerk for Natural Hair prepared the following aging-
of-receivables schedule as of the end of business on December 31, 2012:Natural Hair Company
has a past history of uncollectible accounts by age category, as follows:Age Class Percent
Uncollectible Not past due .......... 1%1–30 days past due ....... 231–60 days past due ........
861–90 days past due ...... 1591–120 days past due ...... 35Over 120 days past due ......
80Instruction1. Estimate the allowance for doubtful accounts, based on the aging-of-receivables
schedule.2. Assume that the allowance for doubtful accounts for Natural Hair Company has a
negative balance of 2$3,500 before adjustment on December 31, 2012. Illustrate the effect on
the accounts and financial statements of the adjustment for uncollectible accounts.3. Natural
Hair Company reported credit sales of $5,000,000 during 2012. Assume that instead of using
the analysis of receivables method of estimating uncollectible accounts, Natural Hair Company
uses the percent of sales method and estimates that 1.25% of sales will be uncollectible.
Illustrate the effect on the accounts and financial statements of the adjustment for uncollectible
accounts using the percent of sales method.4. Assume that on March 4, 2013, Natural Hair
wrote off the $4,350 account of Top Dog Images as uncollectible. Illustrate the effect on the
accounts and financial statements of the write-off of the Top Dog Images account.5. Assume
that on August 17, 2013, Top Dog Images paid $4,350 on its account. Illustrate the effect on the
accounts and financial statements of reinstating and collecting the Top Dog Images account.6.
Assume that instead of using the allowance method, Natural Hair uses the direct write-off
method. Illustrate the effect on the accounts and financial statements of the following:a. The
write-off of the Top Dog Images account on March 4, 2013.b. The reinstatement and collection
of the Top Dog Images account on August 17, 2013.7. Does Amazon.com use the direct write-
off or allowance method of accounting for uncollectible accounts receivable?Explain.
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Natural Hair Company supplies wigs and hair care products to
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