Question

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, $4,290.
May 15.	Received $2,150 as partial payment on the $5,710 account of Dan Pyle. Wrote off the remaining balance as uncollectible.
July 27.	Received $4,290 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 $2,870 Duane DeRosa 2,150 Teresa Galloway 1,290 Ernie Klatt 1,800 Marty Richey 640
Dec. 31	If necessary, record the year-end adjusting entry for uncollectible accounts.

For those amount boxes in which no entry is required, leave the box blank. If an entry is not required, select "No entry" from the dropdown box(es).

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

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 $2,092,700 of credit sales during the year.

Answer 1

1)	Direct method
	Date	Account titles & Explanations				Debit	Credit
	13-Apr	Bad debts expense				4,290
		Account receivable-Dean					4,290
	15-May	Cash				2,150
		Bad debts expense				3,560
		Account receivable-Dan					5,710
	27-Jul	Accounts receivable-Dean				4,290
		Bad debts expense					4,290
		cash				4,290
		Account receivable-Dean					4,290
	31-Dec	Bad debts expense				8,750
		Accounts receivable-Paul Chapman					2,870
		Accounts receivable-Dauna DeRosa					2,150
		Accounts receivable-Teresa Galloway					1,290
		Accounts receivable-Ernie Klatt					1,800
		Accounts receivable-Marty Richey					640
	31-Dec	No Entry
	2)	Allowance method
	Date	Account titles & Explanations				Debit	Credit
	13-Apr	Allowance for Doubtful account				4,290
		Account receivable-Dean					4,290
	15-May	Cash				2,150
		Allowance for Doubtful account				3,560
		Account receivable-Dan					5,710
	27-Jul	Accounts receivable-Dean				4,290
		Allowance for Doubtful account					4,290
		cash				4,290
		Account receivable-Dean					4,290
	31-Dec	Allowance for doubtful account				8,750
		Accounts receivable-Paul Chapman					2,870
		Accounts receivable-Dauna DeRosa					2,150
		Accounts receivable-Teresa Galloway					1,290
		Accounts receivable-Ernie Klatt					1,800
		Accounts receivable-Marty Richey					640
	31-Dec	Bad debts expense				20927
		allowance for Doubtful accounts					20,927
		(2,092,700*1%)