Explanation:

1.The December 31, 2016 balance sheet for Campbell, Inc.included the following:

DebitCredit

Accounts receivable$ 145,000

Allowance for doubtful accounts12,500

Allowance for sales returns and allowances7,500

During 2017, the following transactions occurred:

Sales on account $760,000.Campbell uses the gross method for sales recording.

Sales returns and allowances, $37,000

Collections from customers, $695,000 of which $65,000 qualified for a 1% discount.

Accounts written off $15,000.

Previously written off accounts of $3,500 were collected.

At year-end, the allowance for doubtful accounts was estimated to need a balance equal

to 6.5% of the gross ending accounts receivable balance.

Journalize the 2017 transactions. Disregard any impact on inventory.

Date Account Titles Debit Credit

1) Dec.31 Accounts Receivable 760,000

Sales Revenue 760,000

2) Sales Returns and Allowances 37,000

Accounts Receivable 37,000 ------>this should be Allowance for sales returns and allowances (contra asset like allowance for doubtful accounts)

3) Cash 694.350

Sales Discounts (65,000 x 1%)650

Accounts Receivable 695,000

4) Allowance for Doubtful Accounts 15,000

Accounts Receivable 15,000

5) Accounts Receivable 3,500

Allowances for Doubtful Accounts 3,500

Cash 3,500

Accounts Receivable 3,500

6) Bad Debt Expense 12,422.50 -------> Amount should be 175

Allowance for Doubtful Accounts 12,422.50

This is what I got for the journal entries for 2017. I am not really sure if I got the correct totals for the gross ending accounts receivable balance, or the allowance for doubtful accounts either. I made T accounts and came up with a debit balance in accounts receivable of 206.500 and 6.5% of that is 13,244.50. Then I got a balance in the allowance account of credit 1,000. Can you please help me with this?

Accounts receivable balance beginning 145,000

Sales on account 760,000

Collection from customers (695,000)

Accounts written off (15,000)

Previously written off 3,500

Collected previously written off (3,500)

Gross ending accounts receivable $195,000

Gross ending AR x 6.5% = 195000 x 6.5% = 12,675 ending Allowance for doubtful Accounts

Beg Allowance for doubtful accounts 12,500

Adjustment should be 175

Ending 12,675

Can you please tell me why the adjustment for Allowance for doubtful accounts is 175 and not 11,675? What about the journal entries that were made during the year to the Allowance for doubtful accounts. Wouldn't that change the balance in that account to a 1,000 ending balance? Then adjust 11,675 to get 12,675? Please help me understand what happens to the Journal entries for the Allowance account during the year. Thank you