entries for Bad Debt Expense under the Direct Write-Off andAllowance Methods The following selected transactions were takenfrom the records of Shipway Company for the first year of itsoperations ending December 31: Apr. 13 Wrote off account of DeanSheppard, $5,190. May 15 Received $2,600 as partial payment on the$6,900 account of Dan Pyle. Wrote off the remaining balance asuncollectible. July 27 Received $5,190 from Dean Sheppard, whoseaccount had been written off on April 13. Reinstated the accountand recorded the cash receipt. Dec. 31 Wrote off the followingaccounts as uncollectible (record as one journal entry): PaulChapman $3,480 Duane DeRosa 2,600 Teresa Galloway 1,560 Ernie Klatt2,180 Marty Richey 780 Dec. 31 If necessary, record the year-endadjusting entry for the uncollectible accounts. For those amountboxes in which no entry is required, leave the box blank. If anentry is not required, select "No entry" from the dropdown box(es).a. Journalize the transactions under the direct write-offmethod.
b. Shipway Company uses the percent of creditsales method of estimating uncollectible accounts expense. Based onpast history and industry averages, 2% of credit sales are expectedto be uncollectible. Shipway Company recorded $1,266,500 of creditsales during the year.
Journalize the transactions under the allowance method.
c. How much higher (lower) would ShipwayCompany's net income have been under the direct write-off methodthan under the allowance method?
