Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Method

The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31:

June 8.	Wrote off account of Kathy Quantel, $5,060.
Aug. 14.	Received $3,590 as partial payment on the $9,060 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible.
Oct. 16.	Received the $5,060 from Kathy Quantel, which had been written off on June 8. Reinstated the account and recorded the cash receipt.
Dec. 31.	Wrote off the following accounts as uncollectible (record as one journal entry):

Wade Dolan	$1,470
Greg Gagne	910
Amber Kisko	3,490
Shannon Poole	2,020
Niki Spence	560

Dec. 31 If necessary, record the year-end adjusting entry for the uncollectible accounts. The company prepared the following aging schedule for its accounts receivable:

Aging Class (Number of Days Past Due)									Receivables Balance on December 31				Estimated Percent of Uncollectible Accounts
								0-30 days	$243,000				3	%
								31-60 days	91,000				8
								61-90 days	29,000				20
								91-120 days	11,000				55
								More than 120 days	15,000				85
								Total receivables	$389,000

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

b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $15,180 at the beginning of the year and the company uses the analysis of receivables method

c. How much higher OR (lower) would Rustic Tables net income have been under the direct write-off method than under the allowance method?