Answer: $9,375
Explanation:
Under the direct writeoff method, only the actual bad debts incurred will be taken out from the income for the year.
With the Allowance method however, the amount to be taken out will be the percentage expected to be uncollectible.
Under direct method, income would reduce by the actual bad debt of $30,000.
Under Allowance the income would be reduced by;
= ¾% * 5,250,000
= $39,375
Income would be higher with Direct write-off by;
= 39,375 - 30,000
= $9,375
