B is corrent. The entry for the write-off is as follows:
| Allowance for doubtful accounts | 25,200 | |
| Accounts receivable | | 25,200 |
Both Accounts receivable and Allowance for doubtful accounts are reduced as a result of this transaction. Therefore, there is no effect on the net realizable value or working capital. The $30,000 of bad debt expense would be recorded as a credit to the allowance account, which therefore, would decrease working capital by $30,000.A is incorrect because the bad debt expense entry increases the allowance account, which reduces working capital.
C is incorrect because only the bad debt expense entry affects working capital. Write-offs have no effect.
D is incorrect because only the bad debt expense entry affects working capital. Write-offs have no effect.
