Question

At the beginning of the day, a company had a ledger balance and available balance of $3,860. During the day, the company wrote three checks for $335, $700, and $960. The company also deposited checks for $515 and $915. What is the company's collection float?


Multiple Choice

$565


$3,425


$2,430


$1,430


$1,995

Answer 1

To find the company's collection float, we first need to understand the ledger balance and available balance changes due to deposits and check payments throughout the day.

1. **Starting Balances:**
- Ledger Balance = $3,860
- Available Balance = $3,860

2. **Checks Written (outflows):**
- Total of checks written = $335 + $700 + $960 = $1,995

3. **Deposits Made (inflows):**
- Total deposits = $515 + $915 = $1,430

4. **Calculating the Current Ledger Balance:**
- New Ledger Balance = Starting Balance - Total Checks + Total Deposits
- New Ledger Balance = $3,860 - $1,995 + $1,430
- New Ledger Balance = $3,860 - $1,995 + $1,430
- New Ledger Balance = $3,860 - $565
- New Ledger Balance = $3,295

5. **Calculating the Current Available Balance:**
- Currently, the cash inflow from deposits may not yet be reflected in the available balance until they clear, which might affect the float.
- Therefore, Available Balance = Ledger Balance - Unavailable funds (checks written but not yet cleared)
- Available Balance = $3,860 - $1,995 = $1,865 (this can help assess the collection float).

6. **Collection Float:**
- The collection float is the difference between the available balance and the current ledger balance as it accounts for checks that have not cleared yet.
- Hence, Collection Float = New Ledger Balance - Current Available Balance
- Collection Float = $3,295 - Available Balance
- Collection Float = $3,295 - $1,865
- Collection Float = $1,430

So, the company's collection float is **$1,430**.

Therefore, the correct answer is:

**$1,430**