AICPA CPA-Business Exam - Topic 3 Question 99 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 99
Topic #: 3

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?

A$10,000

B$0

C$(10,000)

D$25,000

Show Suggested Answer

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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Francine

7 months ago

So, is it really just $10,000? Sounds simple!

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Anjelica

8 months ago

Yup, checks take longer to clear than deposits.

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Lindsey

8 months ago

Wait, how does that add up? Seems off.

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Curtis

8 months ago

Totally agree, it's all about the timing!

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Rochell

8 months ago

The float is $10,000.

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Ardella

9 months ago

I think the float is actually $25,000 because we have checks and deposits happening simultaneously, but I’m not completely confident in that.

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Mose

9 months ago

I’m a bit confused about the timing. If checks take five days and deposits take four, does that mean we have a net float?

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Tawny

9 months ago

This reminds me of a practice question where we calculated float based on similar timing. I think the float might be $10,000 since checks take longer to clear.

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Caren

9 months ago

I remember float is the difference between the time checks are written and when they clear, but I'm not sure how to calculate it here.

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Holley

9 months ago

Okay, I think I got it. The float is the difference between the time it takes for the checks to clear versus the deposits to clear. Since the checks take 5 days and the deposits take 4 days, there's a 1-day difference where the company has an extra $10,000 in their account. So the float must be $10,000, which is answer C.

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Tresa

9 months ago

Hmm, I'm a little unsure about this one. Let me walk through it again. The company has $10,000 in checks going out and $10,000 in deposits coming in each day. The checks take 5 days to clear, but the deposits only take 4 days. So there's a 1-day difference where the company has an extra $10,000 in their account. I think that means the float is $10,000, so the answer is C.

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Nieves

9 months ago

This seems straightforward. The company has $10,000 in checks that are outstanding for 5 days, but the deposits only take 4 days to clear. So the float must be the $10,000 that's in the account for that extra day. I'm pretty confident C is the right answer.

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Dorthy

9 months ago

Okay, let me think this through step-by-step. The company writes and receives $10,000 in checks each day, and it takes 5 days for the checks to clear, but only 4 days for the deposits to clear. So the float must be the amount of money that's in the account for that extra day before the checks are deducted. I think the answer is C, $(10,000).

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Allene

1 year ago

Somebody call the float police, because I'm feeling a little floataxed trying to solve this one.

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Paola

1 year 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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Nelida

1 year ago

I agree with D) $25,000.

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Jade

1 year ago

I'm going with A) $10,000.

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Eladia

1 year ago

I think the answer is B) $0.

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Stanford

1 year 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

1 year ago

I agree, the float is negative at $(10,000).

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Tequila

1 year ago

I'm pretty sure it's $(10,000).

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William

1 year ago

I think the float is actually $0.

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Lucy

1 year 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

1 year ago

User 2: Yeah, that makes sense with the timing of the checks and deposits.

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Latia

1 year ago

User 1: The float must be $10,000.

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Alonzo

1 year 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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