Float and Weighted Average Delay Your neighbor goes to the post office once a month and picks up two checks, one for $9,700 and one for 52,600. The larger check takes four days to clear after it is deposited; the smaller one takes five days.
a. What is the total float for the month?
b. What is the average daily float?
c. What arc the average daily receipts and weighted average delay?
a.
To compute: The total amount of company’s float.
Float:
Float is defined as the difference between the balance shown in ledger of the company and the balance that is available at the bank. Available balance refers to the balance that is shown by the banks of that particular company.
Explanation of Solution
Given,
Larger cheque is of $9,700.
The days for clearing the cheque are 4 days.
Smaller cheque is of $2,600.
The days for clearing the smaller check are 5 days.
Formula to calculate total amount of company’s float,
Substitute $38,800 for total float of larger check and $13,000 for total float of smaller cheque.
Total amount of company’s float is $51,800.
Working notes:
Computation of total float of larger check,
Total float of larger cheque is $38,800.
Computation of total float of smaller check,
Total amount of total float is $13,000.
Hence, the total amount of company’s float is $51,800.
b.
To compute: The average daily float.
Explanation of Solution
Number of days in a month is 30.
Formula to calculate average total float,
Substitute $51,800 for amount of total float and 30 for number of days in a month.
Average total float is $1,727.
Hence, the average total float is $1,727.
c.
To compute: The average daily receipts and weighted average delay.
Explanation of Solution
Total amount received from post office is $12,300.
Number of days in a month is 30.
Formula to calculate average daily receipts,
Substitute $12,300 for total amount received from post office and 30 for number of days in a month.
Hence, average daily receipts are $410.
Formula to calculate weighted average delay,
Substitute $9,700 for larger check, $12,300 for total amount received from post office, 4 for clearing the larger check, $2,600 for smaller check and 5 for days for clearing the smaller check.
Weighted average delay is 4.2.
Working notes:
Given,
Larger check is of $9,700.
Smaller check is of $2,600.
Computation of total amount received from post office,
Total amount received from post office is $12,300.
Hence, the average daily receipts and weighted average delay is $410 and 4.2 respectively.
Want to see more full solutions like this?
Chapter 27 Solutions
EBK CORPORATE FINANCE
- Your neighbor goes to the post office once a month and picks up two checks, one for $34,000 and one for $6,000. The larger check takes four days to clear after it is deposited; the smaller one takes six days. What is the average daily receipts (assume one month has 30 days)? $1667 $0 $333 $667 $1333arrow_forward10. Comparing Costs of Checking Accounts. What would be the net annual cost of the following checking accounts? a. Monthly fee, $3.75; processing fee, $0.25 per check; checks written, an average of 22 a month. b. Interest earnings of 6 percent with a $500 minimum balance; average monthly balance, $600; monthly service charge of $15 for falling below the minimum balance, which occurs three times a year (no interest earned in these months). ype here to search 144 10 近arrow_forwardWhat is the annual cost of a checking account with a monthly fee of $7.50 and a processing fee of $0.25 per check if you write an average of 2 checks per month?arrow_forward
- Find the average daily balance for the credit card with the following transactions. Assume one month between billing dates using the proper number of days in the month. Then find the finance charge if interest is 1.5% per month on the average dally balance. Finally, find the new balance. Previous Balance: $556.32 Billing date: July 9 July 15, Return, $114.45 July 17, Purchase, $98.12 July 25, Purchase, $76.12 August 7, Payment, $110 What is the average daily balance? What is the finance charge? What is the new balance?arrow_forwardCalculating the net costs of checking accounts. Determine the annual net cost of these checking accounts: a. Monthly fee $4, check-processing fee of 20 cents, average of 23 checks written per month. b. Annual interest of 1.5% paid if balance exceeds $750, $8 monthly fee if account falls between minimum balance, average monthly balance $815, account falls below $750 durng 4 months.arrow_forwardProblem #1. You have a Visa credit card account with a 26.49% annual percentage rate calculated on the average daily balance. The billing date is the first day of each month, and the billing cycle is the number of days in that month. Your credit card balance on April 1 was $552. On April 10th you made a $119 purchase. You made another purchase, a $25 gift card, on April 24th. You made a $150 payment on April 29th. Show your work for all parts of the problem. (a) What is the average daily balance for April? (b) What is your finance charge on the account as of May 1st? (c) What is your new credit card balance?arrow_forward
- Problem #1. You have a Visa credit card account with a 22.75% annual percentage rate calculated on the average daily balance. The billing date is the first day of each month, and the billing cycle is the number of days in that month. Your credit card balance on June 1 was $307. On June 9th you made a $139 purchase. You made another purchase, a $150 gift card, on June 25th. You made a $250 payment on July 27th. Show your work for all parts of the problem. (a) What is the average daily balance for June? (b) What is your finance charge on the account as of July 1st? (c) What is your new credit card balance?arrow_forward13. For the credit card account, assume one month between billing dates (with the appropriate number of days) and interest of 1.4% per month on the average daily balance. Find (a) the average daily balance, (b) the monthly finance charge, and (c) the account balance for the next billing. Previous Balance: $449.50 January 13 Billing Date January 15 Returns January 22 Clothes January 27 Bus tickets February 2 Payment February 6 Flowers $105.58 $122.54 $77.74 $120 $65.22 (a) The average daily balance is $ (Round to the nearest cent as needed.). (b) The finance charge is $ (Round to the nearest cent as needed.) (c) The account balance for the next billing is $ (Round to the nearest cent as needed.) C O a IS ry ry av toarrow_forwardProblem #1. You have a Visa credit card account with a 20.98% annual percentage rate calculated on the average daily balance. The billing date is the first day of each month, and the billing cycle is the number of days in that month. Your credit card balance on June 1 was $316. On June 9th you made a $125 purchase. You made another purchase, a $50 gift card, on June 25th. You made a $175 payment on June 28th. (a) What is the average daily balance for June? (b) What is your finance charge on the account as of July 1st? (c) What is your new credit card balance? Work MUST be shownarrow_forward
- Calculate the average daily balance and finance charge on the statement below. Note: Round your answers to the nearest cent. 30-day billing cycle 9/16 Billing date Previous balance $ 2,500 9/19 Payment $ 65 Credit 9/30 Charge: Home Depot 1,750 10/3 Payment 65 Credit 10/7 Cash advance 75 Finance charge is 1% on average daily balance. What is the average daily balance? What is the finance charge?arrow_forwardWhat would be the net annual cost of thefollowing checking accounts? a. Monthly fee, $3.75; processing fee, 25cents per check; checks written, anaverage of 14 a month. b. Interest earnings of 4 percent with a$500 minimum balance; average monthlybalance, $600; monthly service charge of$15 for falling below the minimumbalance, which occurs three times a year(no interest earned in these months).arrow_forwardSuppose that the average daily balance on William's American Express Card is $382.2 for a 30-day billing cycle, the amount of the latest running balance on the card is $6941, and the bank charges 1.5% per month on the average daily balance. Determine each of the following. Round the amount to the nearest penny and express it in two decimal places. For example, 97.45, or 34.50, or 57.00. The finance charge for this billing cycle is $ The account balance on the next billing is $arrow_forward
- Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning