Owens Company Uses the Direct Write-Off Method of Accounting for Uncollectible

question 97

Essay

Owens Company uses the direct write-off method of accounting for uncollectible accounts receivable.On December 6,Year 1,Owens sold $6,300 of merchandise to the Valley Company.On August 8,Year 2,after numerous attempts to collect the account,Owens determined that the account of the Valley Company was uncollectible.
a.Prepare the journal entry required to record the transactions on August 8.
b.Assuming that the $6,300 is material,explain how the direct write-off method violates the expense recognition principle in this case.

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Definitions:

Brand Loyalty

The tendency of consumers to continuously purchase one brand’s products over its competitors, often due to satisfaction, trust, or preference.

Marketing Costs

The total expenses associated with promoting a product, service, or brand, including advertising, promotions, and sales personnel expenses.

Copyright Infringement

The unauthorized use of copyrighted material without permission, violating the creator's exclusive rights.

Supply Chain

The entire process of making and selling commercial goods, including raw material sourcing, production, distribution, and delivery to the final customer.