CHAP15 - Q6

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6. 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 clear the bank. Consider the following scenario: The accountant for Sandberg Co. is reconciling the company's bank statement. The reconciling item for outstanding checks is $30,000. What type of float does this scenario describe? Disbursement float Collection float Net float Next, consider the case of Windsor Flooring Company: The management at Windsor Flooring has determined that it takes an average of 8 days for checks the company writes to clear its bank account. Cash receipts from customers are reflected in Windsor's bank account an average of 4 days after the checks are received. On an average day, Windsor writes checks that total $30,000, and it receives checks from customers that total $40,000. 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. Windsor Flooring Company Float Calculations Collection float Disbursement float Net float Given this information, you can deduce that on an average day, Windsor Flooring's bank balance is its book balance. Compute the collection float, the dis $160,000 oat, and the net float in dollars in the following table. Note: By definition, collection float $320,000 hsidered negative, and disbursement float is always positive. Both should be shown as positive numbers here. The net float, howev $120,000 shown as positive if it is favorable and as negative if it is unfavorable. Windsor Flooring Company $240,000 Float Calculations Collection float Disbursement float Net float Given this information, you can deduce that on an average day, Windsor Flooring's bank balance is its book balance. Compute the collection float, the disbursement float, and the net float in dollars in the following table. $320,000 sidered negative, and disbursement float is always positive. Both should be shown as positive shown as positive if it is favorable and as negative if it is unfavorable. Note: By definition, collection float numbers here. The net float, howev $120,000 Windsor Flooring Company $240,000 Float Calculations $160,000 Collection float Disbursement float Net float Given this information, you can deduce that on an average day, Windsor Flooring's bank balance is its book balance 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. -$80,000 Windsor Flooring Company Float Calculations $400,000 Collection float $80,000 Disbursement float Net float Given this information, you can deduce that on an average day, Windsor Flooring's bank balance is its book balance