2. Cheque clearing and the use of float Float is defined as the difference between the balance shown on the books and the belance in the bank account. A lag often occurs between the time receipts and disbursements are recorded on the company's books and when the clear the bank Consider the following scenario: Jones Industries sent a $100,000 cheque to one of its suppliers and recorded it on its books. The funds were available in Jones's account until the payment cleared five days later. What type of float does this scenario describe? O Net float O Disbursement float O Collection float Now consider this scenario: The management at Murphy Flooring Co. determined that it takes an average of four days for cheques the company writes to clear its bank account. Cash receipts from customers are reflected in Murphy's bank account an average of two days after the cheques are received. On an average day, Murphy writes cheques that total $30,000, and it receives cheques from customers that total $40,000 ompute the collection float, the disbursement float, and the net float in d in the following toble. (Hint: By The management at Murphy Flooring Co. determined that it takes an average of four days for cheques the company writes to clear its bank account. Cash receipts from customers are reflected in Murphy's bank account an average of two days after the cheques are received. On an average day, Murphy writes cheques that total $30,000, and it receives cheques from customers that total $40,000 Compute the collection float, the disbursement float, and the net float in dollars in the following table. (Hint: By definition, collection float is always considered negative, and disbursement float is always positive. Both should be shown as positive numbers here. The net float, however, should be shown as positive if it is favourable and as negative if it is unfavourable.) Float Calculations Collection float Disbursement float Net float $160 $80,000 60,000 $120,000 Given this information, you can deduce that on an average day, Murphy Flooring Co.'s bank balance is its book balance. 0 Murphy Flooring Co. Float Calculations Collection float Disbursement float Net float $60,000 $160,000 $80,000 you can deduce that on an average day, Murpl $120,00o's bank balance is ok balance. Grade It Now ioa, uie uigbursement tloat, and the net float in dollars in the following table. (Hint: By ollection float is always considered negative, and disbursement float is always positive. Both should sitive numbers here. The net float, however, should be shown as positive if t is unfavourable.) it is favourable and a Murphy Flooring Co. Float Calculations Collection float Disbursement float Net float -$40,000 formation, you can deduce that on an average day, Murp $200,o00 's bank balance is its book balance