Final answer:
Hanes Co. records the write-off of an uncollectible $150 account by debiting Bad Debts Expense for $150 and crediting Accounts Receivable for the same amount, as per the direct write-off method for handling bad debts.
Step-by-step explanation:
When Hanes Co. determines that it cannot collect $150 from a customer and decides to write off the account using the direct write-off method, the correct accounting entry is to debit Bad Debts Expense and credit Accounts Receivable for $150. This reflects the company's recognition of the debt as an expense and reduces the amount owed by customers.
The journal entry would look as follows:
- Bad Debts Expense: Debit $150
- Accounts Receivable: Credit $150
This entry directly impacts the income statement via the Bad Debts Expense account and reduces the Accounts Receivable balance on the balance sheet.
When using the direct write-off method to record the write-off of a customer account, Hanes Co. will debit accounts receivable for $150.
The direct write-off method is used when a specific customer account is deemed uncollectible. In this case, Hanes Co. has determined that $150 cannot be collected from a customer. To record the write-off, the company debits the accounts receivable account, reducing the amount owed by the customer by $150.