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

question 64

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 (matching) principle in this case.

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Definitions:

Focus Group

Small group of people brought together to discuss a topic of interest to the researcher.

Reliability

The consistency and dependability of a measurement tool or research study over time, implying that similar results could be obtained under consistent conditions.

Second Focus Group

Another group session conducted for research purposes, where participants are engaged in discussions to gather their opinions on a specific topic or product.

Research Participants

Individuals who take part in a research study, contributing data through their responses, behaviors, or physiological measures.