Brewster's writes 145 checks a day for an average amount of $211 each. These checks generally clear the bank 3.5 days after they are written. In addition, the firm generally receives an average of $48,700 a day in checks. The checks that are received are deposited immediately and the funds are generally available the following day. What is the amount of the firm's disbursement float?

Question

Quizplus · Accepted Answer

First, we need to calculate the disbursement float:

Daily disbursements = 145 checks/day x $211/check = $30,595/day

Average time for checks to clear = 3.5 days

Disbursement float = Daily disbursements x Average time to clear = $30,595/day x 3.5 days = $107,082.50

Next, we need to calculate the firm's total float:

Total float = Disbursement float + Collection float

Collection float = Daily collections - Average time for checks to clear

Daily collections = $48,700/day

Average time for checks to clear = 1 day

Collection float = $48,700/day - 1 day = $48,700/day

Total float = $107,082.50 + $48,700 = $155,782.50

Therefore, the best choice is B, $107,082.50.

Brewster's Writes 145 Checks a Day for an Average Amount