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On a typical day, a company writes 47 checks worth a total of $8,455 that clear in 2
On a typical day, a company writes 47 checks worth a total of $8,455 that clear in 2.75 days. The company also collects 59 checks worth a total of $10,220 that clear in 2.25 days. Is this a collection or disbursement float? What is the amount of the float? Multiple Choice A collection float of $256 A disbursement float of $1,765 A collection float of $1,765 A collection float of $413 A disbursement float of $256
Expert Solution
Solution :-
Amount of Checks written by company daily = $8,455
Checks clearance time for disbursement = 2.75 days
So, disbursement float =
Amount of checks written * check clearance time
= $8,455 * 2.75 days
= $ 23,251.25
Amount of checks collected daily = $10,220
Clearing time in collection of check = 2.25 days
Collection float =
= - ( Amount of checks collected * check clearance time in collection )
= - ($10,220 * 2.25 days)
= - $22,995
Amount of net float =
Disbursement float + collection float
= $23,251.25 + (- $22,995 )
= $256.25
Since in absolute values , the disbursement float is $23,251.25 and collection float is $22,295 and disbursement float is more than collection float , so, net float is a disbursement float .
So, the right option is :- A disbursement float of $256
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