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, $8,290 May 15 Received $420 as partial payment on the $7,220 account of Dan Pyle Wrote off the remaining balance as uncollectible July 27 Received $8,290 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 $2,280 Duane DeRosa 3,535 Teresa Galloway 4,625 Ernie Klatt 1,095 Marty Richey 1,800 31 If necessary, journalize the year end adjusting entry for uncollectible accounts Required a Journalize the transactions under the direct write off method 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 75 of credit sales are expected to be uncollectible Shipway Company recorded $3,720,000 of credit sales during the year c How much higher (lower) would Shipway Companys net income have been under the direct write off method than under the allowance method CHART OF ACCOUNTS Shipway Company General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable Paul Chapman 122 Accounts Receivable Duane DeRosa 123 Accounts Receivable Teresa Galloway 124 Accounts Receivable Ernie Klatt 125 Accounts Receivable Dan Pyle 126 Accounts Receivable Marty Richey 127 Accounts Receivable Dean Sheppard 129 Allowance for Doubtful Accounts 131 Interest Receivable 132 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Store Equipment 192 Accumulated Depreciation Store Equipment 193 Office Equipment 194 Accumulated Depreciation Office Equipment LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends

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Posted on Oct 01, 2024

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, $8,290.
May	15	Received $420 as partial payment on the $7,220 account of Dan Pyle. Wrote off the remaining balance as uncollectible.
July	27	Received $8,290 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	$2,280
		Duane DeRosa	3,535
		Teresa Galloway	4,625
		Ernie Klatt	1,095
		Marty Richey	1,800
	31	If necessary, journalize the year-end adjusting entry for uncollectible accounts.

Required:

	a. Journalize the transactions under the direct write-off method.
	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, 0.75% of credit sales are expected to be uncollectible. Shipway Company recorded $3,720,000 of credit sales during the year.
	c. How much higher (lower) would Shipway Companys net income have been under the direct write-off method than under the allowance method?

CHART OF ACCOUNTS

Shipway Company

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-Paul Chapman
122	Accounts Receivable-Duane DeRosa
123	Accounts Receivable-Teresa Galloway
124	Accounts Receivable-Ernie Klatt
125	Accounts Receivable-Dan Pyle
126	Accounts Receivable-Marty Richey
127	Accounts Receivable-Dean Sheppard
129	Allowance for Doubtful Accounts
131	Interest Receivable
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment