Question

USE THIS INFORMATION FOR THE NEXT THREE QUESTIONS. On Jan. 1st Sally buys a computer with her credit card for $500. This transaction posts to her credit card account on Jan. 3rd. On Jan. 31st, Sally's monthly credit card cycle closes (with this being the only purchase) and she receives her bill in the mail on Feb. 5th. She is required to pay her bill by Feb. 25th. She mails her $500 check on Feb. 23rd, it is received by the credit card company on Feb. 24th and the money is withdrawn from her account on Feb. 27th. What is Sally's "credit card float" on this transaction

Answer 1

Answer:

Credit card float is the difference in time between the date of purchase and date when the payment is due.

Credit card Float = 54 days

Explanation:

The purchase date is the 1st January but the has only reflected on the credit card on the 3rd but date of purchase remains the 1st.

This is exactly like in depreciation 'available for use date' and 'date of use'

available for use is used to calculate depreciation, so we start on the purchase date.

on the date when payment is due

we have 25th of Feb and the 23rd of Feb the date of payment

we take 23rd the date of payment

just like in assets if  an asset has a useful life of 3 years and is sold in the two years the only depreciation or accumulated depreciation we reflect is for the years before it is sold.

Therefore the float period is between 1 jan and 23 feb = 54days