Question

alculating Net Float [LO1] Each business day, on average, a company writes checks totaling $17,000 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $22,000. The cash from the payments is available to the firm after two days

Answer 1

Answer:

A.Collection Float ($44,000)

Disbursements Float $68,000

Net Float $24,000

B.Collection Float ($44,000)

Disbursement Float $68,000

Net Float $24,000

Explanation:

A. Calculation the company's disbursement float, collection float, and net float

Per Day Clearing Days Float

Collection Float ($22,000) ×2days = ($44,000)

Disbursements Float $17,000 × 4days = $68,000

Net Float $24,000

($68,000-$44,000)

B. Calculation for the company's disbursement float, collection float, and net float if the collected funds were available in two days instead of four

Per Day Clearing Days Float

Collection Float ($22,000) ×2 days =($44,000)

Disbursement Float $41,500 ×4days= $68,000

Net Float $24,000

($68,000-$44,000)

Hence,

A.Collection Float ($44,000)

Disbursements Float $68,000

Net Float $24,000

B.Collection Float ($44,000)

Disbursement Float $68,000

Net Float $24,000