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# Calculating Float, Net Float, Cash Discounts

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. Calculating Float. You have \$60,000 on deposit with no outstanding checks or uncleared deposits. If you deposit a check for \$110,000.
a. Does this create a disbursement float or a collection float?
b. What is your available balance?
c. Book balance?

6. Calculating Net Float. Each business day, on average, a company writes checks totaling \$43,000 to pay its suppliers. The usual clearing time for the checks is five days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling \$57,000. The cash from the payments is available to the
firm after two days.
a. Calculate the company's disbursement float, collection float, and net float.
b. How would your answer to part (a) change if the collected funds were available in one day instead of two?

7. Cash Discounts. You place an order for 600 units of inventory at a unit price of \$50. The supplier offers terms of 3/10, net 50.
a. How long do you have to pay before the account is overdue? If you take the full period, how much should you remit?
b. What is the discount being offered? How quickly must you pay to get the discount? If you do take the discount, how much should you remit?
c. If you don't take the discount, how much interest are you paying implicitly? How many days' credit are you receiving?

16. EOQ. The Wheeling Pottery Store begins each month with 2,100 pots in STOCK.
This stock is depleted each month and reordered. If the carrying cost per pot is \$6 per year and the fixed order cost is \$250.
A. What is the total carrying cost?
B. What is the restocking cost?
C. Should Wheeling increase or decrease its order size?
D. Describe an optimal inventory policy for Wheeling in terms of order size and order frequency.

##### Solution Summary

The expert calculates the float, net float and cash discounts.

##### Solution Preview

2) a) It creates a collection float.
<br>
<br>b) Available balance = \$60,000.
<br>c) Book balance = 110,000+60000 = ...

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