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, $6,950. May 15 Received $3,480 as partial payment on the $9,240 account of Dan Pyle. Wrote off the remaining balance as uncollectible. July 27 Received $6,950 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 $4,660 Duane DeRosa 3,480 Teresa Galloway 2,090 Ernie Klatt 2,920 Marty Richey 1,040 Dec. 31 If necessary, record the year-end adjusting entry for the uncollectible accounts. a. Journalize the transactions under the direct write-off method. Apr. 13 Bad Debt Expense Accounts Receivable-Dean Sheppard May 15 Cash Bad Debt Expense Accounts Receivable-Dan Pyle July 27-reinstate Accounts Receivable-Dean Sheppard Bad Debt Expense July 27-collection Cash Accounts Receivable-Dean Sheppard III 1 ml I I IIIII I II I Dec. 31-write-off Bad Debt Expense Accounts Receivable-Paul Chapman Accounts Receivable-Duane DeRosa Accounts Receivable-Teresa Galloway Accounts Receivable-Ernie Klatt Accounts Receivable-Marty Richey Dec. 31-adjusting No entry No entry b. Shipway Company uses the percent of credit sales method of estimating uncollectible accounts expense. Based on past history and industry averages, 2% of credit sales are expected to be uncollectible. Shipway Company recorded $1,695,800 of credit sales during the year. Journalize the transactions under the allowance method. Apr. 13 Allowance for Doubtful Accounts Accounts Receivable-Dean Sheppard May 15 Cash Allowance for Doubtful Accounts Accounts Receivable-Dan Pyle July 27-reinstate Accounts Receivable-Dean Sheppard Allowance for Doubtful Accounts July 27-collection Cash Accounts Receivable-Dean Sheppard I bilin | Hill I l II Dec. 31-write-off Allowance for Doubtful Accounts Accounts Receivable-Paul Chapman Accounts Receivable-Duane DeRosa Accounts Receivable-Teresa Galloway Accounts Receivable-Ernie klatt Accounts Receivable-Marty Richey Dec. 31-adjusting Bad Debt Expense Allowance for Doubtful Accounts c. How much higher (lower) would Shipway Company's net income have been under the direct write-off method than under the allowance method? Higher by $