Aa Aa E 4. 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: Graham Industries received a $60,000 check from one of its customers, deposited it in its bank account, and recorded it on its books. The funds were reflected in Graham's bank account two days later. What type of float does this scenario describe? Collection float Disbursement float Net float Now consider this scenario: The management at Herman Flooring Co. 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 Herman's bank account an average of four days after the checks are received. On an average day, Herman writes checks that total $40,000, and it receives checks from customers that total $50,000. 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.)