Potaw Company reported the following data at the end of 2014: $\begin{array}{lr}\text { Sales revenue ( } 75 \% \text { on credit) }&\$300,000\
\text { Expenses ( } 26 \% \text { on credit) }&60,000\
\text { Accounts receivable, net at December } 31,2014 \text { (a decrease }\
\text { of } \$ 4,000 \text { during 2014) } & 8,000 \
\text { Total assets } & 200,000 \
\text { Stockholders' equity } & 150,000
\end{array}$ The average number of days to collect receivables during 2014 is closest to:
A) 16.2.
B) 14.3.
C)36.5.
D)21.9.

Question

Quizplus · Accepted Answer

The average number of days to collect receivables is calculated as follows:Average collection period = (365 days * Average accounts receivable) / Credit salesAverage accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2= (8,000 + 12,000) / 2= 10,000Credit sales = Sales revenue * Credit sales percentage= 300,000 * 75%= 225,000Average collection period = (365 days * 10,000) / 225,000= 16.2 days

Potaw Company Reported the Following Data at the End of 2014