At Reyes Company, checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks

E7-5 At Reyes Company, checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file cabinet. The purchasing agent pays all bills pertaining to goods purchased for resale. Prior to payment, the purchasing agent determines that the goods have been received and verifies the mathematical accuracy of the vendor’s invoice. After payment, the invoice is filed by vendor and the purchasing agent records the payment in the cash disbursements journal. The treasurer pays all other bills following approval by authorized employees. After payment, the treasurer stamps all bills “paid,” files them by payment date, and records the checks in the cash disbursements journal. Reyes Company maintains one checking account that is reconciled by the treasurer.

Instructions
(a) List the weaknesses in internal control over cash disbursements.
(b) Identify improvements for correcting these weaknesses.


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(Calculating Float) In a typical month, the Hampton Corporation receives 80 checks totaling $139,000

(Calculating Float) In a typical month, the Hampton Corporation receives 80 checks totaling $139,000. These are delayed four days on average. What is the average daily float? Assume 30 days in a month.

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(Calculating Net Float) Each business day, on average, a company writes checks totaling $12,000 to pay its suppliers

(Calculating Net Float) Each business day, on average, a company writes checks totaling $12,000 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customer each day, in the form of checks, totaling $23,000. The cash from the payments is available to the firm after two days. 

a) Calculate the company’s disbursement float, collection float, and net float.

b) How would you answer to part (a) change if the collected funds were available in one day instead of two?

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