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: Apr. 13 Wrote off account of Dean Sheppard, $4,750. May 15 Received $2,380 as partial payment on the $6,320 account of Dan Pyle. Wrote off the remaining balance as uncollectible. Received $4,750 from Dean Sheppard, whose account had been written off on April 13. Reinstated the account and recorded the cash July 27 receipt. Dec. 31 Wrote off the following accounts as uncollectible (record as one journal entry): Paul Chapman $3,180 Duane DeRosa 2,380 Teresa Galloway 1,430 Ernie Klatt 2,000 Marty Richey 710 Dec. 31 If necessary, record the year-end adjusting entry for the uncollectible accounts. For those amount boxes in which no entry is required, leave the box blank. If an entry is not required, select "No entry" from the dropdown box(es). a. Journalize the transactions under the direct write-off method. Apr. 13 Bad Debt Expense Accounts Receivable-Dean Sheppard May 15 Cash Bad Debt Expense Accounts Receivable-Dan Pyle July 27-reinstate Accounts Receivable-Dean Sheppard Bad Debt Expense July 27-collection Cash Accounts Receivable-Dean Sheppard 111 111111 I 111 11111111 Dec. 31-write-off Bad Debt Expense Accounts Receivable-Paul Chapman Accounts Receivable-Duane DeRosa Accounts Receivable-Teresa Galloway Accounts Receivable-Ernie klatt Accounts Receivable-Marty Richey Dec. 31-adjusting No entry No entry b. Shipway Company uses the percent of credit sales method of estimating uncollectible accounts expense. Based on past history and industry averages, 3% of credit sales are expected to be uncollectible. Shipway Company recorded $772,900 of credit sales during the year. Journalize the transactions under the allowance method. Apr. 13 Allowance for Doubtful Accounts Accounts Receivable-Dean Sheppard Cash May 15 Allowance for Doubtful Accounts Accounts Receivable-Dan Pyle July 27-reinstate Accounts Receivable-Dean Sheppard Allowance for Doubtful Accounts 0011 I I II I. July 27-collection Cash Accounts Receivable-Dean Sheppard Dec. 31-write-off Allowance for Doubtful Accounts UJIUI Accounts Receivable-Paul Chapman Accounts Receivable-Duane DeRosa Accounts Receivable-Teresa Galloway Accounts Receivable-Ernie klatt Accounts Receivable-Marty Richey Dec. 31-adjusting diustin Bad Debt Expense Bad Allowance for Doubtful Accounts Feedback Check My Work Remember that under the direct write-off method, Bad Debt Expense is not recorded until the customer's account is determined to be worthless. Under the allowance method once a customer account is identified as uncollectible, it is written off against the allowance account. Learning Objective 5. c. How much higher (lower) would Shipway Company's net income have been under the direct write-off method than under the allowance method? Higher by $