7. Check clearing and the use of float Float is defined as the difference between the balance shown on the books and the balance in the bank account. A lag often occurs between the time receipts and disbursements are recorded on the company's books and when the transactions dear the bank. Consider the following scenario: The accountant for Graham Co. is reconciling the company's bank statement. A total difference of $20,000 needs to be analyzed. What type of float does this scenario describe? O Net float O Collection float O Disbursement float Next, consider the case of Herman Flooring Company: The management at Herman Flooring has determined that it takes an average of six days for checks the company writes to clear its bank account. Cash receipts from customers are reflected in Herman's bank account an average of four days after the checks are received. On an average day, Herman writes checks that total $10,000, and it receives checks from customers that total $20,000. Compute the collection float, the disbursement float, and the net float in dollars in the following table. (Note: 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 favorable and as negative if it is unfavorable.) Herman Flooring Company Float Calculations Collection float Disbursement float Net Moat Given this information, you can deduce that on an average day, Herman Flooring's bank balance is its book balance