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Entries for Bad Debt Expense under the Direct Write-Off and Allowance Methods

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.

If no entry is required, select "No entry" 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.

Apr. 13	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
May 15	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsCashNo entrySales	- Select -	- Select -
	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsBad Debt ExpenseNo entrySales	- Select -	- Select -
	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
July 27	Accounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseLandNo entrySales	- Select -	- Select -
	Accounts Payable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseLandNo entrySales	- Select -	- Select -
July 27	Accounts Payable-Dean SheppardAccumulated Depreciation-Office EquipmentAllowance for Doubtful AccountsCashNo entrySales	- Select -	- Select -
	Accounts Receivable-Dean SheppardAccumulated Depreciation-Office EquipmentAllowance for Doubtful AccountsCashNo entrySales	- Select -	- Select -
Dec. 31	Accounts Payable-Paul ChapmanAccounts Receivable-Paul ChapmanAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Paul ChapmanAccounts Receivable-Paul ChapmanAllowance for Doubtful AccountsBad Debt ExpenseNo entrySales	- Select -	- Select -
	Accounts Payable-Duane DeRosaAccounts Receivable-Duane DeRosaAllowance for Doubtful AccountBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Teresa GallowayAccounts Receivable-Teresa GallowayAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Ernie KlattAccounts Receivable-Ernie KlattAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Marty RicheyAccounts Receivable-Marty RicheyAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
Dec. 31	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -

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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, 3/4% of credit sales are expected to be uncollectible. Shipway recorded $3,778,000 of credit sales during the year.

Apr. 13	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
May 15	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleBad Debt ExpenseCashNo entrySales	- Select -	- Select -
	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsBad Debt ExpenseNo entrySales	- Select -	- Select -
	Accounts Payable-Dan PyleAccounts Receivable-Dan PyleAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
July 27	Accounts Payable-Dean SheppardAccounts Receivable-Dean SheppardAllowance for Doubtful AccountsBad Debt ExpenseNo entrySales	- Select -	- Select -
	Accounts Payable-Dean SheppardAccumulated Depreciation-Office EquipmentAllowance for Doubtful AccountsBad Debt ExpenseLandNo entry	- Select -	- Select -
July 27	Accounts Payable-Dean SheppardBad Debt ExpenseCashInterest RevenueLandNo entry	- Select -	- Select -
	Accumulated Depreciation-Office EquipmentAccounts Receivable-Dean SheppardBad Debt ExpenseCashLandNo entry	- Select -	- Select -
Dec. 31	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsDividendsLandNo entry	- Select -	- Select -
	Accounts Payable-Paul ChapmanAccounts Receivable-Paul ChapmanDividendsLandNo entrySales	- Select -	- Select -
	Accounts Payable-Duane DeRosaAccounts Receivable-Duane DeRosaCashDividendsLandNo entry	- Select -	- Select -
	Accounts Payable-Teresa GallowayAccounts Receivable-Teresa GallowayCashDividendsLandNo entry	- Select -	- Select -
	Accounts Payable-Ernie KlattAccounts Receivable-Ernie KlattDividendsLandNo entrySales	- Select -	- Select -
	Accounts Payable-Marty RicheyAccounts Receivable-Marty RicheyCashDividendsLandNo entry	- Select -	- Select -
Dec. 31	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseNo entrySales	- Select -	- Select -
	Accounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseIncome SummaryNo entrySales	- Select -	- Select -

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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?

HigherLower

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