Potaw Company reported the following data at the end of 2010: $$\begin{array} { l r }
\text { Sales revenue } ( 75 \% \text { on credit) } & \$ 300,000 \
\text { Expenses } ( 26 \% \text { on credit) } & 60,000 \
\text { Accounts receivable, net at December } 31,2010 \text { (a decrease } & \
\text { of } \$ 4,000 \text { during } 2010 ) & 8,000 \
\text { Total assets } & 200,000 \
\text { Stockholders' equity } & 150,000
\end{array}$$ What was the average number of days to collect receivables during 2010?
A)16.2.
B)14.3.
C)36.5.
D)21.9.

Question

Potaw Company reported the following data at the end of 2010: $$\begin{array} { l r } 
\text { Sales revenue } ( 75 \% \text { on credit) } & \$ 300,000 \
\text { Expenses } ( 26 \% \text { on credit) } & 60,000 \
\text { Accounts receivable, net at December } 31,2010 \text { (a decrease } & \
\text { of } \$ 4,000 \text { during } 2010 ) & 8,000 \
\text { Total assets } & 200,000 \
\text { Stockholders' equity } & 150,000
\end{array}$$ What was the average number of days to collect receivables during 2010?
A)16.2.
B)14.3.
C)36.5.
D)21.9.

Quizplus · Accepted Answer

Average collection period = (365 days * Average accounts receivable) / Credit salesAverage accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2= (12,000 + 8,000) / 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 2010