Smoking remains more common in much of Europe than in the United States. In the United States, there is a strong relationship between education and smoking: well-educated people are less likely to smoke. Does a similar relationship hold in France? Here is a two-way table of the level of education and smoking status (nonsmoker, former smoker, moderate smoker, heavy smoker) of a sample of 467 French men aged 20 to 60 years. The subjects are a random sample of men who visited a health center for a routine checkup. We are willing to consider them an SRS of men from their region of France.

The null hypothesis states that there is no relationship between these variables. That is, the distribution of smoking is the same for all three levels of education.

(a) Find the expected counts for each smoking status among men with a university education. This is one row of the two-way table of expected counts. Find the row total and verify that it agrees with the row total for the observed counts.

Use two decimals for the expected counts and a whole number for the total.

The issues surrounding the levels and structure of executive compensation have gained added prominence in the wake of the financial crisis that erupted in the fall of 2008. Based on the 2006 compensation data obtained from the Securities and Exchange Commission (SEC) website, it was determined that the mean and the standard error of compensation for the 582 highest paid CEOs in publicly traded U.S. companies are $12.01 million and $11.38 million, respectively. An analyst randomly chooses 31 CEO compensations for 2006 a. Is it necessary to apply the finite population correction factor? b. Is the sampling distribution of the sample mean approximately normally distributed? c. Calculate the expected value and the standard error of the sample mean. d. What is the probability that the sample mean is more than $17 million?

a. Is it necessary to apply the finite population correction factor?

b. Is the sampling distribution of the sample mean approximately normally distributed?

c. Calculate the expected value and the standard error of the sample mean.

d. What is the probability that the sample mean is more than $17 million?

Financial Accounting: Question about Business Ethics

Maurice Stokes was one of the best classmates of Roy Russell while he studied his MBA in the USA. Maurice grew up in Addis Ababa, the capital of Ethiopia. Ethiopia’s GDP per capita ranked 187 out of 191 countries due to adverse geopolitics and civil wars in the past. Maurice is talented and hard working. He went through his bachelor degree in Ethiopia and luckily won a scholarship to study an MBA in the USA. Right after he got his MBA degree, Maurice joined AB&T, the world’s biggest mobile phone service provider, as a management trainee. After 5 years’ working in the USA, Maurice was assigned to work as the Vice President in Addis Ababa, where AB&T’s African headquarter is located, to oversee all African operations.

After his MBA graduation, Roy Russell joined his father’s family business– a medium size mobile phone service provider in Hong Kong. Three years later, AB&T acquired Roy’s family business and retained all existing staff. Roy then became an employee of AB&T and he was happy to work for a multinational company with good reputation. After 3 years’ working as financial controller in AB&T’s Singapore office, Roy was offered an opportunity for promotion to work as chief financial officer (CFO) in its African headquarter in Addis Ababa. Eager to get more international exposure, Roy said yes to this offer. This is how Roy came to a reunion with Maurice.

AB&T provides its senior employees in Addis Ababa with a monthly housing allowance of up to $2,500. Compared with the US standard, most of the housing in Addis Ababa is of low quality, and in many regions the law and order are bad. By giving a generous allowance, AB&T aims to ensure that its senior employees live in areas that are safe, convenient and comfortable to ensure that senior executives can have good rest, that they live in a district that is appropriate to the company’s reputation. For housing allowance claim, senior executives need to hand in their monthly receipts for reimbursement. Every month Maurice submits a bill of $2,500 from his landlord to the finance office for re-imbursement. Roy suggested paying a visit Maurice’s house for a few times. However, every time Maurice rejected this suggestion, claiming that he had never entertained any coworkers at home so that his family members would not be distributed. Roy considered this understandable and so did not insist.

After working for six months in Addis Ababa, Roy had a business dinner with a supplier. The supplier mentioned that Maurice was a neighbor in a district called Winter Town. Winter Town is a district quite far from AT&T’s African office and is well-known for its high crime rate in Addis Ababa. Roy was surprised to hear that, as Maurice told him that he lived in Spring Town, a district that many foreign ambassadors lived and a lot more expensive than Winter Town. Through some connection, Roy verified that what the supplier said was true.

Roy decided to confront Maurice about the housing allowance issue. Maurice at first denied but later admitted that his apartment was in Winter Town and the rent was less than $2,500. He defended his action by saying that “Every AB&T senior executive gets $2,500 a month. If I live in an economically way, why should I be penalized? I just receive the same as others”. As a reply, Roy stressed that “It is AB&T objective to let senior employees to live in a safe place and have good rest for the challenging duties during office hours. Besides, the districts that the company’s senior executives live in represent the image of the company. Moreover, the company’s housing allowance policy is reimbursement on an actual basis, i.e. the amount of monthly claim should be the same as the rental value of the apartment and not to allow staff to make a profit. As the regional CFO, I have to maintain my professional standing”. When Roy challenged Maurice for using falsified rental receipts for disbursement claims, Maurice admitted but replied that this is a common and well-accepted practice in Ethiopia.

Later in the discussion, Maurice tried to convince Roy regarding his housing allowance claim practice. Maurice explained his situation that “You may not understand my situation. I have to save every dollar to pay school fees for my ten nephews and nieces. I got my family members’ great support to finish my education. I owe it to my brothers and sisters to give their children the same chance to study as I did. My parents can never understand why I live in a big apartment instead of helping their grandchildren. I am just doing what I should do. The company has no extra expense to reimburse me $2,500 housing allowance per the monthly receipt I submit. As my old classmate and my best friend, please pretend you know nothing and pay me $2,500 housing allowance as before. As a person grown up in Ethiopia, I know all business practice here and have good connection in this country. I know many senior executives in the government tax department and that will be helpful to your work here. I will fully support you to do an excellent job to save some tax for the benefit of our company. You will be compliment by your boss for paying a lower tax than other companies here”.

Roy does not want to lose his friendship with Maurice and he believes it will make his working life easier if he can make use of Maurice’s connection in Africa. Roy is not sure what should be his next step.

Required

1. Identify the ethical issue, if any, involved in this case?                                
2. Who are the stakeholders in this situation? How are they affected? (Hins: state all stakeholder)   
3. What are Roy’s alternatives? (Hins: state at least 3)
4. What course of action will you suggest Roy Russell to take and justify your suggestion? (Hins: reply the alternative in Q3)

I would like to ask this question about ethics in business. Thank you.

Maurice Stokes was one of the best classmates of Roy Russell while he studied his MBA in the USA. Maurice grew up in Addis Ababa, the capital of Ethiopia. Ethiopia’s GDP per capita ranked 187 out of 191 countries due to adverse geopolitics and civil wars in the past. Maurice is talented and hard working. He went through his bachelor degree in Ethiopia and luckily won a scholarship to study an MBA in the USA. Right after he got his MBA degree, Maurice joined AB&T, the world’s biggest mobile phone service provider, as a management trainee. After 5 years’ working in the USA, Maurice was assigned to work as the Vice President in Addis Ababa, where AB&T’s African headquarter is located, to oversee all African operations.

After his MBA graduation, Roy Russell joined his father’s family business– a medium size mobile phone service provider in Hong Kong. Three years later, AB&T acquired Roy’s family business and retained all existing staff. Roy then became an employee of AB&T and he was happy to work for a multinational company with good reputation. After 3 years’ working as financial controller in AB&T’s Singapore office, Roy was offered an opportunity for promotion to work as chief financial officer (CFO) in its African headquarter in Addis Ababa. Eager to get more international exposure, Roy said yes to this offer. This is how Roy came to a reunion with Maurice.

AB&T provides its senior employees in Addis Ababa with a monthly housing allowance of up to $2,500. Compared with the US standard, most of the housing in Addis Ababa is of low quality, and in many regions the law and order are bad. By giving a generous allowance, AB&T aims to ensure that its senior employees live in areas that are safe, convenient and comfortable to ensure that senior executives can have good rest, that they live in a district that is appropriate to the company’s reputation. For housing allowance claim, senior executives need to hand in their monthly receipts for reimbursement. Every month Maurice submits a bill of $2,500 from his landlord to the finance office for re-imbursement. Roy suggested paying a visit Maurice’s house for a few times. However, every time Maurice rejected this suggestion, claiming that he had never entertained any coworkers at home so that his family members would not be distributed. Roy considered this understandable and so did not insist.

After working for six months in Addis Ababa, Roy had a business dinner with a supplier. The supplier mentioned that Maurice was a neighbor in a district called Winter Town. Winter Town is a district quite far from AT&T’s African office and is well-known for its high crime rate in Addis Ababa. Roy was surprised to hear that, as Maurice told him that he lived in Spring Town, a district that many foreign ambassadors lived and a lot more expensive than Winter Town. Through some connection, Roy verified that what the supplier said was true.

Roy decided to confront Maurice about the housing allowance issue. Maurice at first denied but later admitted that his apartment was in Winter Town and the rent was less than $2,500. He defended his action by saying that “Every AB&T senior executive gets $2,500 a month. If I live in an economically way, why should I be penalized? I just receive the same as others”. As a reply, Roy stressed that “It is AB&T objective to let senior employees to live in a safe place and have good rest for the challenging duties during office hours. Besides, the districts that the company’s senior executives live in represent the image of the company. Moreover, the company’s housing allowance policy is reimbursement on an actual basis, i.e. the amount of monthly claim should be the same as the rental value of the apartment and not to allow staff to make a profit. As the regional CFO, I have to maintain my professional standing”. When Roy challenged Maurice for using falsified rental receipts for disbursement claims, Maurice admitted but replied that this is a common and well-accepted practice in Ethiopia.

Later in the discussion, Maurice tried to convince Roy regarding his housing allowance claim practice. Maurice explained his situation that “You may not understand my situation. I have to save every dollar to pay school fees for my ten nephews and nieces. I got my family members’ great support to finish my education. I owe it to my brothers and sisters to give their children the same chance to study as I did. My parents can never understand why I live in a big apartment instead of helping their grandchildren. I am just doing what I should do. The company has no extra expense to reimburse me $2,500 housing allowance per the monthly receipt I submit. As my old classmate and my best friend, please pretend you know nothing and pay me $2,500 housing allowance as before. As a person grown up in Ethiopia, I know all business practice here and have good connection in this country. I know many senior executives in the government tax department and that will be helpful to your work here. I will fully support you to do an excellent job to save some tax for the benefit of our company. You will be compliment by your boss for paying a lower tax than other companies here”.

Roy does not want to lose his friendship with Maurice and he believes it will make his working life easier if he can make use of Maurice’s connection in Africa. Roy is not sure what should be his next step.

Required

1. Identify the ethical issue, if any, involved in this case?                                     

2. Who are the stakeholders in this situation? How are they affected?

3. What are Roy’s alternatives?   

4. What course of action will you suggest Roy Russell to take and justify your suggestion?

Maurice Stokes was one of the best classmates of Roy Russell while he studied his MBA in the USA. Maurice grew up in Addis Ababa, the capital of Ethiopia. Ethiopia’s GDP per capita ranked 187 out of 191 countries due to adverse geopolitics and civil wars in the past. Maurice is talented and hard working. He went through his bachelor degree in Ethiopia and luckily won a scholarship to study an MBA in the USA. Right after he got his MBA degree, Maurice joined AB&T, the world’s biggest mobile phone service provider, as a management trainee. After 5 years’ working in the USA, Maurice was assigned to work as the Vice President in Addis Ababa, where AB&T’s African headquarter is located, to oversee all African operations.

After his MBA graduation, Roy Russell joined his father’s family business– a medium size mobile phone service provider in Hong Kong. Three years later, AB&T acquired Roy’s family business and retained all existing staff. Roy then became an employee of AB&T and he was happy to work for a multinational company with good reputation. After 3 years’ working as financial controller in AB&T’s Singapore office, Roy was offered an opportunity for promotion to work as chief financial officer (CFO) in its African headquarter in Addis Ababa. Eager to get more international exposure, Roy said yes to this offer. This is how Roy came to a reunion with Maurice.

AB&T provides its senior employees in Addis Ababa with a monthly housing allowance of up to $2,500. Compared with the US standard, most of the housing in Addis Ababa is of low quality, and in many regions the law and order are bad. By giving a generous allowance, AB&T aims to ensure that its senior employees live in areas that are safe, convenient and comfortable to ensure that senior executives can have good rest, that they live in a district that is appropriate to the company’s reputation. For housing allowance claim, senior executives need to hand in their monthly receipts for reimbursement. Every month Maurice submits a bill of $2,500 from his landlord to the finance office for re-imbursement. Roy suggested paying a visit Maurice’s house for a few times. However, every time Maurice rejected this suggestion, claiming that he had never entertained any coworkers at home so that his family members would not be distributed. Roy considered this understandable and so did not insist.

After working for six months in Addis Ababa, Roy had a business dinner with a supplier. The supplier mentioned that Maurice was a neighbor in a district called Winter Town. Winter Town is a district quite far from AT&T’s African office and is well-known for its high crime rate in Addis Ababa. Roy was surprised to hear that, as Maurice told him that he lived in Spring Town, a district that many foreign ambassadors lived and a lot more expensive than Winter Town. Through some connection, Roy verified that what the supplier said was true.

Roy decided to confront Maurice about the housing allowance issue. Maurice at first denied but later admitted that his apartment was in Winter Town and the rent was less than $2,500. He defended his action by saying that “Every AB&T senior executive gets $2,500 a month. If I live in an economically way, why should I be penalized? I just receive the same as others”. As a reply, Roy stressed that “It is AB&T objective to let senior employees to live in a safe place and have good rest for the challenging duties during office hours. Besides, the districts that the company’s senior executives live in represent the image of the company. Moreover, the company’s housing allowance policy is reimbursement on an actual basis, i.e. the amount of monthly claim should be the same as the rental value of the apartment and not to allow staff to make a profit. As the regional CFO, I have to maintain my professional standing”. When Roy challenged Maurice for using falsified rental receipts for disbursement claims, Maurice admitted but replied that this is a common and well-accepted practice in Ethiopia.

Later in the discussion, Maurice tried to convince Roy regarding his housing allowance claim practice. Maurice explained his situation that “You may not understand my situation. I have to save every dollar to pay school fees for my ten nephews and nieces. I got my family members’ great support to finish my education. I owe it to my brothers and sisters to give their children the same chance to study as I did. My parents can never understand why I live in a big apartment instead of helping their grandchildren. I am just doing what I should do. The company has no extra expense to reimburse me $2,500 housing allowance per the monthly receipt I submit. As my old classmate and my best friend, please pretend you know nothing and pay me $2,500 housing allowance as before. As a person grown up in Ethiopia, I know all business practice here and have good connection in this country. I know many senior executives in the government tax department and that will be helpful to your work here. I will fully support you to do an excellent job to save some tax for the benefit of our company. You will be compliment by your boss for paying a lower tax than other companies here”.

Roy does not want to lose his friendship with Maurice and he believes it will make his working life easier if he can make use of Maurice’s connection in Africa. Roy is not sure what should be his next step.

Required

1. Identify the ethical issue, if any, involved in this case?   

2. Who are the stakeholders in this situation? How are they affected?  

3. What are Roy’s alternatives?

4. What course of action will you suggest Roy Russell to take and justify your suggestion?

SCENARIO:

Eva Melon, the CEO and majority shareholder of OuterSpace Corp. (OSC) (incorporated in Delaware) founded the company to develop the technology needed to make commercial space flights available to the average citizen. She believed that space could be made available for colonization and that the energy and resources needed to sustain life in outer space could be harvested from other planets, such as Mars. Eva spent most of her substantial fortune investing in renewable energy and philanthropic endeavors aimed at making life more comfortable through technological breakthroughs. Because Eva’s mother was from the United States and Eva’s father was from France, she held citizenship in both countries. She frequently traveled back and forth operating OSC from her homes in both countries.

Eva’s most recent project for OSC involved the design and construction of a space vehicle. While Eva had initially planned on manufacturing the vehicle in the United States, she projected that she could save approximately $10 million dollars by manufacturing the vehicle in China. However, she wanted to launch the vehicle from a spaceport either in Russia or the United States. Several test flights were slated on the project’s schedule for the years 2020 and 2021 which included a standard flight into low earth orbit, a docking with the international space station, and finally, a trip to Mars for natural resource sample collection. If successful in all the test flights, OSC planned on launching short commercial trips to space for individuals in 2023 and “colonization” flights to Mars some time thereafter.

To help secure funding for the research and development of the project, OSC also developed and produced solar panels for sale to the public, which were very similar to the ones that they would be using on their space vehicles for energy while in space. The panels were highly successful not only because of their technological brilliance, but also thanks to the public’s fascination with Eva, who was portrayed in the media as the “architect of the future.” OSC’s solar panels dominated the solar panel market, effectively shutting down other solar panel companies both domestically and abroad. Upset by the shift in the market, a competing foreign company, SolarX, filed a suit against OSC in federal court for violations of Section 1 of the Sherman Act.

Undeterred, OSC entered into agreement with a Chinese company to begin the manufacture of the space vehicle. However, upon learning of the agreement, the United States government immediately notified OSC that they were in violation of the U.S. Department of State’s International Traffic in Arms Regulation laws and that OSC must cease all transfer of technology and data related to the manufacturing of the vehicle. Concurrently, the Chinese government, in learning of the agreement and realizing the benefit of the technology to its national government, seized control of the manufacturing facility. OSC immediately filed suit in the United States against the manufacturing facility and Chinese government. It also brought an injunction against the U.S. government to prevent the enforcement of any federal regulation prohibiting OSC from using the Chinese company to manufacture space vehicles.

Knowing how long the lawsuits would take and wanting to stay on schedule, OSC opened a manufacturing facility in France to continue the construction of the space vehicle through a wholly-owned subsidiary of OSC (rather than an outside company).

The publicity surrounding OSC’s struggle to get its vehicle built and operational was overwhelmingly in support of OSC. As a result, OSC hinted at solidifying its decision to launch the vehicle from the United States, at a spaceport which it would build in Texas, for use in all its testing operations.

ETHICS QUESTION:

1. In 5-10 sentences, answer the following question. Assume OSC grants an exclusive interview to a 24-hour news channel about the economic status of the company hours after the seizure of the manufacturing facility in China. Chen Li is the marketing director for OSC and is assigned to the interview. Li does not know if the news station yet knows about the seizure, but knows he will be asked about the financial state of the company. He confirms that the confiscation has actually cost the company millions, which will impact the company's finances significantly but has been told by Eva "not to spook investors because we will recover." When asked by the interviewer, "Where is the company financially today, and what can we expect in terms of company growth over the next year?" Li responds, "OSC's management is as strong as ever and we expect revenues to climb in the future." Li never mentions the losses incurred by the seizure. Is this an ethical answer and should Li have disclosed the company's losses? Is corporate marketing "spin" an ethical business practice?

If you were the CFO for a $10 billion-a-year international company headquartered in Ireland, which accounting rules would you recommend your company to follow: U.S. GAAP or IFRS? Are these rules comparable? What are the major differences between the two accounting standards? What was your rationale for choosing a rule?

Under the acquisition method, when the fair value of net assets is higher than the consideration transferred, then the following entry is recorded?

A. Credit to goodwill

B. Debit to goodwill

C. Credit to gain on bargain purchase

D. Debit to gain on bargain purchase

E. Long term assets of acquired company are reduced

Trecek Corporation incurs research and development costs of $690,000 in 2017, 30 percent of which relate to development activities subsequent to IAS 38 criteria having been met that indicate an intangible asset has been created. The newly developed product is brought to market in January 2018 and is expected to generate sales revenue for 10 years.

Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.

Required:

Prepare journal entries for research and development costs for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.

Prepare the entry(ies) that Trecek would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.

Trecek Corporation incurs research and development costs of $650,000 in 2017, 30 percent of which relate to development activities subsequent to IAS 38 criteria having been met that indicate an intangible asset has been created. The newly developed product is brought to market in January 2018 and is expected to generate sales revenue for 10 years.

Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.

Required:

1. Prepare journal entries for research and development costs for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.

2. Prepare the entry(ies) that Trecek would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.