Entwhistle Ltd.supplied the following information for the years-ended December 31, 2013 and 2014: $\begin{array}{lcc}
\text { Current Assets: } & 2014 & 2013 \
\text { Cash } & \$ 15,000 & 16,750 \
\text { Accounts Receivable } & 247,500 & 299,000 \
\text { Inventory } & 275,000 & 166,250 \
\text { Prepaid expenses } & 4,000 & 4,000 \\
\text { Current liabilities }&\$541,500&\$1,084,000\\\text { Net credit sales } & \$ 2,400,000 & \$ 2,255,000 \
\text { Purchases } & \$ 1,700,000 & \$ 1,590,000
\end{array}$ Entwhistle's credit terms are net 30 days. On average, Entwhistle has been collecting its accounts receivable:
A)within the 30 days required by its credit terms.
B)after the 30 days has passed.
C)within the discount period of 10 days.
D)more information is needed to answer this question.

Question

Entwhistle Ltd.supplied the following information for the years-ended December 31, 2013 and 2014: $\begin{array}{lcc}
 \text { Current Assets: } & 2014 & 2013 \
\text { Cash } & \$ 15,000 & 16,750 \
\text { Accounts Receivable } & 247,500 & 299,000 \
\text { Inventory } & 275,000 & 166,250 \
\text { Prepaid expenses } & 4,000 & 4,000 \\
\text { Current liabilities }&\$541,500&\$1,084,000\\\text { Net credit sales } & \$ 2,400,000 & \$ 2,255,000 \
\text { Purchases } & \$ 1,700,000 & \$ 1,590,000
\end{array}$ Entwhistle's credit terms are net 30 days. On average, Entwhistle has been collecting its accounts receivable:
A)within the 30 days required by its credit terms.
B)after the 30 days has passed.
C)within the discount period of 10 days.
D)more information is needed to answer this question.

Quizplus · Accepted Answer

The average collection period can be calculated using the formula: (Accounts Receivable / Net Credit Sales) * 365. For 2014, it is (247,500 / 2,400,000) * 365 ≈ 37.6 days, which is after the 30 days required by its credit terms.

Entwhistle Ltd Entwhistle's Credit Terms Are Net 30 Days