Question

Taylor Company uses the direct write-off method of recording uncollectible accounts receivable. Recently, a customer informed Taylor that he would be unable to pay $300 owed to Taylor. Taylor's proper journal entry to reflect this event would be:

a.Uncollectible Accts Expense 300
Allow. for Uncollectible Accts 300
b.Allow. for Uncollectible Accts 300
Accounts Receivable 300
c.Uncollectible Accts Expense 300
Accounts Receivable 300
d.Sales 300
Accounts Receivable 300

Answer 1

The proper journal entry for Taylor Company would be Uncollectible Accounts Expense $300 and Allowance for Uncollectible Accounts $300.

Step-by-step explanation:

The proper journal entry for Taylor Company to reflect the event of a customer being unable to pay $300 owed would be Option A: Uncollectible Accounts Expense $300 and Allowance for Uncollectible Accounts $300.

This is because the direct write-off method is used to record uncollectible accounts receivable. Under this method, the company waits until it is certain that a specific customer's account is uncollectible before recording the loss. The Uncollectible Accounts Expense account represents the expense incurred from uncollectible accounts, while the Allowance for Uncollectible Accounts account is used to estimate and accumulate the amount that may not be collected from customers.

In this case, the $300 owed by the customer would be deemed uncollectible, requiring the company to recognize it as an expense (Uncollectible Accounts Expense) and reduce the accumulated estimate of uncollectible accounts (Allowance for Uncollectible Accounts).