MC Enterprises Estimates That It Takes, on Average, Seven Days

question 29

Multiple Choice

MC Enterprises estimates that it takes, on average, seven days for their customers' payments to reach them, two days for the payments to be processed and deposited by their bookkeeping department, and three more days for the checks to clear once they're deposited. What is their collection float?

• A) 12 days
• B) 10 days
• C) 9 days
• D) 7 days

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Definitions:

Notes Payable

A written promise to pay a specific sum of money to a person or entity at a future date, categorized as a liability on the balance sheet.

Accrued Interest Payable

Interest that has been incurred but not yet paid, typically appearing on the balance sheet as a liability.

Next Period

Refers to the forthcoming time frame in accounting or business planning, usually the next month, quarter, or fiscal year.

Interest Recognize

The accounting practice of recording interest earned or incurred in the period it is applicable, regardless of when it is paid.