Thank you for your question. Just as you mentioned, the goal of our transcription project is for searchability within the National Archives Catalog - so formatting is not critical.
I suggest you transcribe in whichever way is easier for you. Both being equal, think about which is easier for a user to read if they happen to look at the transcription. For me, the second example would be easier to read.
I hope this helps.
Community Manager, National Archives Catalog