allowance of doubtful debt

CFA Level II
#1

It is in a 2009 mock afteroon test, Q.22

Allowance of doubtful debt decrease in mid of economy recession.

After adjustment, allowance of doubtful debt should be revised up, hence net account receivable will decrease. Inventory should be higher as well.

Any clues why inventory should be higher?

Thank you.

#2

The only l9inkage I can think of, is if it somehow reduces COGS for that period. If the account receivable is written off, do you reduce your sales by that amount and COGS figure proportionally? If so, given ending inventory = beginning + purchases - COGS; inventory will go up.

Just a possibility.