Ted's Toys just reconciled its bank account and has $12,300 in outstanding deposits and $31,400 in checks outstanding.The firm's checkbook has a positive balance.The firm sells on a cash basis only and deposits its receipts on a daily basis.The deposited funds are available to the firm the following day.The firm writes and mails checks on a daily basis also.These checks generally clear the bank in three days.What do you know about the firm's float given this information?

Question

Quizplus · Accepted Answer

Float is the time between when a payment is made by the firm and when the payment is received by the recipient. In this case, the checks outstanding exceed the outstanding deposits, meaning that the firm has more money leaving the account than entering, resulting in a disbursement float. Therefore, the correct answer is D.

Ted's Toys Just Reconciled Its Bank Account and Has $12,300