Average daily collection of checks for a firm is $50,000.The firm also writes on the average $35,000 of checks daily.If the collection period for checks is 5 days,calculate the net float.
A) -$75,000
B) $75,000
C) -$425,000
D) $425,000

Question

Quizplus · Accepted Answer

Net float is calculated as the difference between the collection float and the disbursement float. The collection float is $50,000 * 5 = $250,000, and the disbursement float is $35,000 * 5 = $175,000. Therefore, the net float is $250,000 - $175,000 = $75,000. Since the firm collects more than it disburses, the net float is negative, hence -$75,000.

Average Daily Collection of Checks for a Firm Is $50,000