Answer:
Decrease in Working Capital amounts to $9,000
Explanation:
Working Capital is the difference among the current assets like accounts receivable, cash and inventories and the current liabilities like the account payable of the company.
So, in this case,
Reporting the bad debts expense, the entry would be:
Bad debts expense A/c................................Dr $9,000
Allowance for bad debts A/c....................Cr $9,000
When writing of the uncollectible accounts receivable, the entry would be:
Allowance for bad debts A/c....................Dr $5,000
Accounts Receivable A/c...................Cr $5,000
Therefore, the net decrease in working capital will be computed as:
Net decrease in working capital = $9,000 + $5,000 - $5,000
Net decrease in working capital = $9,000
