Ch19+Answers+to+assigned+problems+v7

Ch19+Answers+to+assigned+problems+v7 - CHAPTER19 CASH AND...

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CHAPTER19 CASH AND LIQUIDITY MANAGEMENT Basic 1. (LO1) The average daily float is the average amount of checks received per day times the average number of days delay, divided by the number of days in a month. Assuming 30 days in a month, the average daily float is: Average daily float = 4($156,000)/30 Average daily float = $20,800 2. (LO1) a. The disbursement float is the average monthly checks written times the average number of days for the checks to clear, so: Disbursement float = 4($14,000) Disbursement float = $56,000 The collection float is the average monthly checks received times the average number of days for the checks to clear, so: Collection float = 2(–$26,000) Collection float = –$52,000 The net float is the disbursement float plus the collection float, so: Net float = $56,000 – 52,000 Net float = $4,000 b. The new collection float will be: Collection float = 1(–$26,000) Collection float = –$26,000 And the new net float will be: Net float = $56,000 – 26,000 Net float = $30,000 3. (LO1) a. The collection float is the average daily checks received times the average number of days for the checks to clear, so: Collection float = 3($19,000) Collection float = $57,000
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b. The firm should pay no more than the amount of the float, or $57,000, to eliminate the float.
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