The following selected transactions were taken from the records of Shipway Company for the first...

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, $3,960.

May 15 - Received $1,980 as partial payment on the $5,270 account of Dan Pyle. Wrote off the remaining balance as uncollectible

July 27 - Received $3,960 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 $2,650

- Duane DeRosa $1,980

- Teresa Galloway $1,190

- Ernie Klatt $1,660

- Marty Richey $590

Dec. 31- If necessary, record the year-end adjusting entry for the uncollectible accounts.

Required

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

b. Shipway Company uses the percent of credit sales method of estimating uncollectible accounts expense. Based on past history and industry averages, 3% of credit sales are expected to be uncollectible. Shipway Company recorded $643,700 of credit sales during the year.

Journalize the transactions under the allowance method.

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