Question

Each business day, on average, a company writes checks totaling $41,500 to pay its suppliers. The usual clearing time for the checks is six days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $52,500. The cash from the payments is available to the firm after four days.

Required:
a. Calculate the company's disbursement float, collection float, and net float (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

b. Calculate the company's disbursement float, collection float, and net float if the collected funds were available in two days instead of four (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g.. 32.).

Answer 1

Answer:

A.Collection Float ($208,000)

Disbursements Float $249,000

Net Float $41,000

B.Collection Float ($104,000)

Disbursement Float $249,000

Net Float $145,000

Explanation:

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

Per Day Clearing Days Float

Collection Float ($52,000) ×4days = ($208,000)

Disbursements Float $41,500 × 6days = $249,000

Net Float $41,000

($249,000-$208,000)

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 ($52,000) ×2 days =($104,000)

Disbursement Float $41,500 ×6 days= $249,000

Net Float $145,000

($249,000-$104,000)

Hence,

A.Collection Float ($208,000)

Disbursements Float $249,000

Net Float $41,000

B.Collection Float ($104,000)

Disbursement Float $249,000

Net Float $145,000