Concept explainers
Float and Weighted Average Delay [LO1] Your neighbor goes to the post office once a month and picks up two checks, one for $13,000 and one for $4,500. The larger check takes four days to clear after it is deposited; the smaller one takes three days. Assume 30 days in a month.
a. What is the total float for the month?
b. What is the average daily float?
c. What are the average daily receipts and weighted average delay?
a)
To calculate: The overall float for a month.
Introduction:
The float is the difference between the bank cash and the book cash denoting the net effects of checks during the clearing process.
Answer to Problem 4QP
The total float is $65,500.
Explanation of Solution
Given information:
Once in a month, Person X’s neighbor collects two checks; one check for $13,000 and another check for $4,500. The clearing days of the check after it is deposited is 4 days, and 3 days for the larger check and smaller check respectively.
Formula to calculate the overall float:
Calculate the collection float:
Hence, the total float is $65,500.
b)
To calculate: The average float daily.
Introduction:
The float is the difference between the bank cash and the book cash denoting the net effects of checks during the clearing process.
Answer to Problem 4QP
The average daily float is $2,183.33.
Explanation of Solution
Given information:
Once in a month, Person X’s neighbor collects two checks; one check for $13,000 and another check for $4,500. The clearing days of the check after it is deposited is 4 days, and 3 days for the larger check and smaller check respectively.
Formula to calculate the average daily float:
Calculate the average daily float:
Hence, the average daily float is $2,183.33.
c)
To calculate: The average daily receipts and weighted average delay.
Introduction:
The float is the difference between the bank cash and the book cash denoting the net effects of checks during the clearing process.
Answer to Problem 4QP
The average daily receipts is $583.33 and the weighted average delay is 3.74 days.
Explanation of Solution
Given information:
Once in a month, Person X’s neighbor collects two checks; one check for $13,000 and another check for $4,500. The clearing days of the check after it is deposited is 4 days, and 3 days for the larger check and smaller check respectively.
Formula to compute the average daily charge:
Compute the average daily charge:
Hence, the average daily charge is $583.33.
Formula to compute the weighted average delay:
Compute the weighted average delay:
Hence, the weighted average delay is 3.74 days.
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