Sandy Corporation uses the allowance method of accounting for uncollectible accounts.During 2014,Sandy had charged $80,000 to Bad Debt Expense,and wrote off accounts receivable of $90,000 as uncollectible.What was the amount of the decrease in working capital as a result of these entries?

Question

Quizplus · Accepted Answer

The decrease in working capital is equal to the amount charged to Bad Debt Expense, which is $80,000. This is because the write-off of accounts receivable does not affect working capital as it only reduces both accounts receivable and the allowance for doubtful accounts.

Sandy Corporation Uses the Allowance Method of Accounting for Uncollectible