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AICPA Exam CPA-Business Topic 3 Question 99 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 99
Topic #: 3
[All CPA-Business Questions]

Assume that each day a company writes and receives checks totaling $10,000. If it takes five days for the checks to clear and be deducted from the company's account, and only four days for the deposits to clear, what is the float?

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Suggested Answer: D

Choice 'd' is correct. Reorder costs do not impact the level of safety stock.

Choices 'a', 'b', and 'c' are incorrect. Safety stock levels are affected by:

1. Uncertain sales forecasts - greater uncertainty means a higher level of safety stock should be carried.

2. Dissatisfaction of customers - if customers are dissatisfied with back orders (which occur when there are stock outs), then more safety stock should be carried to prevent stock outs.

3. Uncertain lead times - greater uncertainty means a higher level of safety stock is needed.


by Floyd at Sep 16, 2024, 05:28 PM

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Allene
25 days ago
Somebody call the float police, because I'm feeling a little floataxed trying to solve this one.
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Paola
26 days ago
This is a real head-scratcher. I feel like I'm in a float tank just trying to figure it out. Wait, did I just make a pun? I'm going with D, $25,000.
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Stanford
1 months ago
Ugh, I hate these tricky float questions. Isn't the float supposed to be negative? I'm going to go with C, $(10,000).
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Tyra
15 days ago
I agree, the float is negative at $(10,000).
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Tequila
19 days ago
I'm pretty sure it's $(10,000).
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William
22 days ago
I think the float is actually $0.
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Lucy
2 months ago
Hold on, let me break this down. If they write and receive $10,000 in checks per day, and the checks take 5 days to clear but the deposits only take 4 days, that means they have an extra day's worth of cash in their account. So the float must be $10,000.
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Mona
13 days ago
User 2: Yeah, that makes sense with the timing of the checks and deposits.
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Latia
15 days ago
User 1: The float must be $10,000.
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Alonzo
2 months ago
This seems like a simple math problem. The float is the difference between the time it takes for checks to clear and the time it takes for deposits to clear, so it must be $25,000.
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Judy
2 months ago
But if the checks take longer to clear than the deposits, wouldn't that create a float of $10,000?
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Mollie
2 months ago
I disagree, I believe the answer is A) $10,000.
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Judy
2 months ago
I think the answer is B) $0.
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