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, $$2,080.$

May $15.$ Received $$1,040$ as partial payment on the $$2,770$ account of Dan Pyle. Wrote off the remaining balance as uncollectible.

July $27.$ Received $$2,080$ 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 $$1,390$

Duane DeRosa $1,040$

Teresa Galloway $620$

Ernie Klatt $870$

Marty Richey $310$

$31.$ 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.

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

DateAccountDebitCredit

Apr. $13$

Bad Debt Expense

$2,080$

$0$

Accounts Receivable$-$Dean Sheppard

$0$

$2,080$

May $15$

Cash

$1,040$

$0$

Bad Debt Expense

$1,730$

$0$

Accounts Receivable$-$Dan Pyle

$0$

$2,770$

July $27$

Accounts Receivable$-$Dean Sheppard

$2,080$

$0$

Bad Debt Expense

$0$

$2,080$

July $27$

Cash

$2,080$

$0$

Accounts Receivable$-$Dean Sheppard

$0$

$2,080$

Dec. $31$

Bad Debt Expense

$4,230$

$0$

Accounts Receivable$-$Paul Chapman

$0$

$1,390$

Accounts Receivable$-$Duane DeRosa

$0$

$1,040$

Accounts Receivable$-$Teresa Galloway

$0$

$620$

Accounts Receivable$-$Ernie Klatt

$0$

$870$

Accounts Receivable$-$Marty Richey

$0$

$310$

Dec. $31$

No Entry Required

$0$

$0$

No Entry Required

$0$

$0$

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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, $1\%$ of credit sales are expected to be uncollectible. Shipway Company recorded $$1,013,200$ of credit sales during the year.

DateAccountDebitCredit

Apr. $13$

Allowance for Doubtful Accounts

$2,080$

$0$

Accounts Receivable$-$Dean Sheppard

$0$

$2,080$

May $15$

Cash

$1,040$

$0$

Allowance for Doubtful Accounts

$1,730$

$0$

Accounts Receivable$-$Dan Pyle

$0$

$2,770$

July $27$

Accounts Receivable$-$Dean Sheppard

$2,080$

$0$

Allowance for Doubtful Accounts

$0$

$2,080$

July $27$

Cash

$2,080$

$0$

Accounts Receivable$-$Dean Sheppard

$0$

$2,080$

Dec. $31$

Allowance for Doubtful Accounts

$4,230$

$0$

Accounts Receivable$-$Paul Chapman

$0$

$1,390$

Accounts Receivable$-$Duane DeRosa

$0$

$1,040$

Accounts Receivable$-$Teresa Galloway

$0$

$620$

Accounts Receivable$-$Ernie Klatt

$0$

$870$

Accounts Receivable$-$Marty Richey

$0$

$310$

Dec. $31$

Bad Debt Expense

$10,132$

$0$

Allowance for Doubtful Accounts

$0$

$10,132$

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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 fill in the blank $1$ of $1$$