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Chapter 17

# Chapter 17 - 1 You have \$36,300 on deposit with no...

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You have \$36,300 on deposit with no outstanding checks or uncleared deposits. One day you write a check for \$3,800 and then deposit a check for \$7,200. Required: What are your disbursement, collection, and net floats? (Do not include the dollar signs (\$). Negative amounts should be indicated by a minus sign.) Disbursement float \$ Collection float \$ Net float \$ Explanation: Your disbursement float is the amount of the check you wrote, or \$3,800. The collection float is the amount of the check deposited, or –\$7,200. The net float is the sum of the disbursement float and collection float, or: Net float = \$3,800 - 7,200 Net float = -\$3,400 2. You place an order for 1,000 units of Good X at a unit price of \$47. The supplier offers terms of 2/25, net 45. Requirement 1: (a) How long do you have to pay before the account is overdue? Number of days (b) If you take the full period, how much should you remit? (Do not include the dollar sign (\$).) Remittance \$ Requirement 2: (a) What is the discount being offered? (Do not include the percent sign (%).)
Discount rate % (b) How quickly must you pay to get the discount? Number of days (c) If you do take the discount, how much should you remit? (Do not include the dollar sign (\$).) Remittance \$ Requirement 3: (a) If you don’t take the discount, how much interest are you paying implicitly? (Do not include the dollar sign (\$).) Implicit interest \$ (b) How many days’ credit are you receiving? Days’ credit Explanation: 1: There are 45 days until the account is overdue. If you take the full period, you must remit: Remittance = 1,000(\$47) Remittance = \$47,000 2: There is a 2 percent discount offered, with a 25 days discount period. If you take the discount, you will only have to remit: Remittance = (1 – 0.02)(\$47,000) Remittance = \$46,060 3: The implicit interest is the difference between the two remittance amounts, or: Implicit interest = \$47,000 – 46,060

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Implicit interest = \$940 The number of days’ credit offered is: Days’ credit = 45 – 25 Days’ credit = 20 days 3. In a typical month, the Tanner Corporation receives 100 checks totaling \$117,000. These are delayed four days on average. Assume 30 days in a month. Required: What is the average daily float? (Do not include the dollar sign (\$).) Average daily float \$ Explanation: The average daily receipts are the total amount of checks received divided by the number of days in a month. Assuming 30 days in a month, the average daily float is: Average daily receipts = \$117,000/30 Average daily receipts = \$3,900 This is the average amount of checks received per day. The average check takes four days to clear, so the average daily float is: Average daily float = 4(\$3,900) Average daily float = \$15,600 4.
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