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5. Check clearing and the use of float Float is defined as the difference between the balance shown on the books and the balance in

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5. Check clearing and the use of float Float is defined as the difference between the balance shown on the books and the balance in the bank account. A lag often occurs between the time receipts and disbursements are recorded on the company's books and when the transactions clear the bank Consider the following scenario The accountant for Destin Co. is reconciling the company's bank statement. The reconciling item for outstanding checks is $10,000 what type of float does this soenario describe? O Collection float O Disbursement float O Net float Next, consider the case of washbum Flooring Company: The management at Washburn Flooring has determined that it takes an average of four days for checks the company writes to clear its bank account. Cash receipts from customers are reflected in washburm's bank account an average of four days after the checks are received. Onan average day, Washburn writes checks that total $10,000, and it receives checks from customers that total $20,000. Compute the collection float, the disbursement float, and the net float in dollars in the following table. (Note: By definition, collection float is always considered negative, and disbursement float is always positive. Both should be shown as positive numbers here. The net float, however, should be shown as positive if it is favorable and as negative if it is unfavorable.) Washburn Flooring Company Float Calculations Collection float Disbursement float Net float Given this information, you can deduoe that on an average day, Washbum Flooring's bank balance is its book balance. grea less than the same as

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