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I mainly need help with part C of this question but here is the whole question. The following selected transactions were taken from the records
I mainly need help with part C of this question but here is the whole question.
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, $8,030. | |
May | 15. | Received $500 as partial payment on the $7,430 account of Dan Pyle. Wrote off the remaining balance as uncollectible. | |
July | 27. | Received $8,030 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 | $2,205 | ||
Duane DeRosa | 3,510 | ||
Teresa Galloway | 4,785 | ||
Ernie Klatt | 1,185 | ||
Marty Richey | 1,710 | ||
31. | If necessary, record the year-end adjusting entry for uncollectible accounts. |
Required:
a. Journalize the transactions under the direct write-off method. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. If no entry is required, simply skip to the next transaction. | |
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, 0.65% of credit sales are expected to be uncollectible. Shipway Company recorded $4,046,000 of credit sales during the year. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. If no entry is required, simply skip to the next transaction. | |
c. How much higher (lower) would Shipway Companys net income have been under the direct write-off method than under the allowance method? |
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