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, $8,450 May 15 Received $500 as partial payment on the $7,100 account of Dan Pyle Wrote off the remaining balance as uncollectible July 27 Received $8,450 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 $2,225 Duane DeRosa 3,550 Teresa Galloway 4,770 Ernie Klatt 1,275 Marty Richey 1,690 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, of credit sales are expected to be uncollectible Shipway Company recorded $3,778,000 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 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 Owner, Capital 311 Owner, Drawing 312 Income Summary REVENUE 410 Sales 610 Interest Revenue c How much higher (lower) would Shipway Companys net income have been under the direct write off method than under the allowance method by EXPENSES 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense Store Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 530 Office Salaries Expense 531 Rent Expense 532 Depreciation Expense Office Equipment 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expensea 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 PAGE 1 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST REF DEBIT CREDIT ASSETS LIABILITIES EQUITY

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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

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, $8,450.
May	15.	Received $500 as partial payment on the $7,100 account of Dan Pyle. Wrote off the remaining balance as uncollectible.
July	27.	Received $8,450 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	$2,225
		Duane DeRosa	3,550
		Teresa Galloway	4,770
		Ernie Klatt	1,275
		Marty Richey	1,690
	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, ¾% of credit sales are expected to be uncollectible. Shipway Company recorded $3,778,000 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 Company’s 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	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

c. How much higher (lower) would Shipway Company’s net income have been under the direct write-off method than under the allowance method?
by

EXPENSES

510

Cost of Merchandise Sold

520

Sales Salaries Expense

521

Advertising Expense

522

Depreciation Expense-Store Equipment

523

Delivery Expense

524

Repairs Expense

529

Selling Expenses

530

Office Salaries Expense

531

Rent Expense

532

Depreciation Expense-Office Equipment

533

Insurance Expense

534

Office Supplies Expense

535

Store Supplies Expense

536

Credit Card Expense

537

Cash Short and Over

538

Bad Debt Expense

539

Miscellaneous Expense

710

Interest Expensea. 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.
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ACCOUNTING EQUATION