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, $6,720. May 15. Received $3,360 as partial payment on the $8,940 account of Dan Pyle. Wrote off the remaining balance as uncollectible. July 27. Received $6,720 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 $4,500 Duane DeRosa 3,360 Teresa Galloway 2,020 Ernie Klatt 2,820 Marty Richey 1,010 31. If necessary, record the year-end adjusting entry for the 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. Question Content Area

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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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, $6,720.
May 15. Received $3,360 as partial payment on the $8,940 account of Dan Pyle.  Wrote off the remaining balance as uncollectible.
July 27. Received $6,720 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 $4,500
Duane DeRosa 3,360
Teresa Galloway 2,020
Ernie Klatt 2,820
Marty Richey 1,010
31.  If necessary, record the year-end adjusting entry for the 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.

Question Content Area

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

Apr. 13
 
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Dec. 31
 
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Dec. 31
 
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Question Content Area

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 $3,279,300 of credit sales during the year.

Apr. 13
 
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May 15
 
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July 27
 
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July 27
 
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Dec. 31
 
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Dec. 31
 
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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?

 

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