Entries for bad debt expense under the direct write-off and allowance methods

The following selected transactions were taken from the records of Shipway Company for the first year of its operations ending December 31:

Date	Transaction
Apr. 13.	Wrote off account of Dean Sheppard, $8,450.
May 15.	Received $500 as partial payment on the $7,100 account of Dan Pyle. Wrote off the remaining balance as uncollectible.
July 27.	Received $8,450 from Dean Sheppard, whose account had been written off on April 13. Reinstated the account and recorded the cash receipt.
Dec. 31.	Wrote off the following accounts as uncollectible (record as one journal entry): Paul Chapman $2,225 Duane DeRosa 3,550 Teresa Galloway 4,770 Ernie Klatt 1,275 Marty Richey 1,690
31.	If necessary, journalize the year-end adjusting entry for uncollectible accounts.

If no entry is required, select "No Entry Required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

Question Content Area

a. Journalize the transactions under the direct write-off method.

Date	Account	Debit	Credit
Apr. 13	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
May 15	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsCashNo Entry Required	- Select -	- Select -
	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
July 27	Accounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo Entry RequiredSales	- Select -	- Select -
	ccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo Entry RequiredSales	- Select -	- Select -
July 27	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsCashNo Entry Required	- Select -	- Select -
	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsCashNo Entry Required	- Select -	- Select -
Dec. 31	Accounts Payable-Paul ChapmanAccounts Receivable-Paul ChapmanAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Paul ChapmanAccounts Receivable-Paul ChapmanAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Duane DeRosaAccounts Receivable-Duane DeRosaAllowance for Doubtful AccountBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Teresa GallowayAccounts Receivable-Teresa GallowayAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Ernie KlattAccounts Receivable-Ernie KlattAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Marty RicheyAccounts Receivable-Marty RicheyAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
Dec. 31	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -

Question Content Area

b. Journalize the transactions under the allowance method. Shipway Company uses the percent of credit sales method of estimating uncollectible accounts expense. Based on past history and industry averages, 3/4% of credit sales are expected to be uncollectible. Shipway recorded $3,778,000 of credit sales during the year.

Date	Account	Debit	Credit
Apr. 13	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
May 15	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleBad Debt ExpenseCashNo Entry Required	- Select -	- Select -
	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsCashNo Entry Required	- Select -	- Select -
July 27	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
July 27	Accounts Payable-Dean SheppardBad Debt ExpenseCashInterest RevenueNo Entry Required	- Select -	- Select -
	Accumulated Depreciation-Office EquipmentAccounts Receivable-Dean SheppardBad Debt ExpenseCashNo Entry Required	- Select -	- Select -
Dec. 31	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsLandNo Entry Required	- Select -	- Select -
	Accounts Payable-Paul ChapmanAccounts Receivable-Paul ChapmanLandNo Entry RequiredSales	- Select -	- Select -
	Accounts Payable-Duane DeRosaAccounts Receivable-Duane DeRosaCashLandNo Entry Required	- Select -	- Select -
	Accounts Payable-Teresa GallowayAccounts Receivable-Teresa GallowayCashLandNo Entry Required	- Select -	- Select -
	Accounts Payable-Ernie KlattAccounts Receivable-Ernie KlattLandNo Entry RequiredSales	- Select -	- Select -
	Accounts Payable-Marty RicheyAccounts Receivable-Marty RicheyCashLandNo Entry Required	- Select -	- Select -
Dec. 31	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseNo Entry Required	- Select -	- Select -
	Accounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseIncome SummaryNo Entry Required	- Select -	- Select -

Question Content Area

c. How much higher (lower) would Shipway Company's net income have been under the direct write-off method than under the allowance method?

HigherLower

by fill in the blank 1 of 1$