Maggie bought a house which was quite a dump in 1989 for $75,000. She fixed it up with paint and wallpaper but in 1996 she did a major renovation which cost $50,000. In 1993, she bought a dump of a cottage for $35,000 because it was both on a lake and near some good cross-country ski trails. She winterized it immediately for $10,000. Over time, the dumpy cottage has become quite attractive with the addition of a new roof, siding, windows and doors all of which cost $15,000 in 1995. In addition, she is fond of landscaping and has created quite a beautiful garden. I might add that Maggie has only $40,000 in RRSPs since she prefers to sink her money into her living space.

In July 2006, Maggie lost her job and received $60,000 in severance pay. She put as much as she could into her RRSP (included in the $40,000 above) and put the rest in GICs to help finance her plan. Maggie had been taking courses for several years to become a Master Gardener.

When she lost her job, she decided to live out her dream of having a gardening business where she would design gardens for others with cottages near her and maintain them if they needed it because they mostly come to their cottages on the weekend to relax. In the winter, she will keep the lanes clear (with her snow blower) and check up on the cottages now and again. She gave her corporate clothes to her friend Kate with the proviso that she could stay with her when she comes to the City (which won’t be often because she is very fed up).

When she lost her job, she immediately started renting out the house for $1,600 a month plus utilities. She still has to pay the $2,400 a year taxes and maintenance but figures the house will be her retirement fund. When she started renting out the house, it immediately ceased to be her principal residence – her cottage is now her principal residence. In July 2006, her house was worth $300,000 and the cottage is worth $140,000.

Questions:

a.     Maggie’s house increases in value at about 3% a year from 2006 and she sells it in 2017. How much is her taxable capital gain on the house ignoring real estate commissions?

b.    Maggie’s cottage also increases 3% a year in value. If she also sells it in 2017 in order to buy a bed and breakfast, how much is her taxable capital gain?

Explain the relationship among cost, cost objective, cost accumulation, and cost allocation.

The U.S. Geological Survey compiled historical data about Old Faithful Geyser (Yellowstone National Park) from 1870 to 1987. Let x₁ be a random variable that represents the time interval (in minutes) between Old Faithful eruptions for the years 1948 to 1952. Based on 9520 observations, the sample mean interval was x₁ = 61.2 minutes. Let x₂ be a random variable that represents the time interval in minutes between Old Faithful eruptions for the years 1983 to 1987. Based on 25,340 observations, the sample mean time interval was x₂ = 71.2 minutes. Historical data suggest that σ₁ = 8.35 minutes and σ₂ = 12.41 minutes. Let μ₁ be the population mean of x₁ and let μ₂ be the population mean of x₂.

(a) Compute a 95% confidence interval for μ₁ – μ₂. (Use 2 decimal places.)

(b) Comment on the meaning of the confidence interval in the context of this problem. Does the interval consist of positive numbers only? negative numbers only? a mix of positive and negative numbers? Does it appear (at the 95% confidence level) that a change in the interval length between eruptions has occurred? Many geologic experts believe that the distribution of eruption times of Old Faithful changed after the major earthquake that occurred in 1959.

Because the interval contains only positive numbers, we can say that the interval length between eruptions has gotten shorter.

Because the interval contains both positive and negative numbers, we can not say that the interval length between eruptions has gotten longer.  

We can not make any conclusions using this confidence interval.

Because the interval contains only negative numbers, we can say that the interval length between eruptions has gotten longer.

The U.S. Geological Survey compiled historical data about Old Faithful Geyser (Yellowstone National Park) from 1870 to 1987. Let x₁ be a random variable that represents the time interval (in minutes) between Old Faithful eruptions for the years 1948 to 1952. Based on 9280 observations, the sample mean interval was x₁ = 62.0 minutes. Let x₂ be a random variable that represents the time interval in minutes between Old Faithful eruptions for the years 1983 to 1987. Based on 24,170 observations, the sample mean time interval was x₂ = 69.6 minutes. Historical data suggest that σ₁ = 8.35 minutes and σ₂ = 12.76 minutes. Let μ₁ be the population mean of x₁ and let μ₂ be the population mean of x₂.

(a) Compute a 99% confidence interval for μ₁ – μ₂. (Use 2 decimal places.)

(b) Comment on the meaning of the confidence interval in the context of this problem. Does the interval consist of positive numbers only? negative numbers only? a mix of positive and negative numbers? Does it appear (at the 99% confidence level) that a change in the interval length between eruptions has occurred? Many geologic experts believe that the distribution of eruption times of Old Faithful changed after the major earthquake that occurred in 1959.

Because the interval contains only positive numbers, we can say that the interval length between eruptions has gotten shorter.Because the interval contains both positive and negative numbers, we can not say that the interval length between eruptions has gotten longer.    We can not make any conclusions using this confidence interval.Because the interval contains only negative numbers, we can say that the interval length between eruptions has gotten longer.

Exercise 4

On January 1, 2017, Park Rapids Lumber Company issued $80 million in 20-year, 10% bonds payable. Interest is payable semiannually on June 30th and December 31st. Bond discounts and premiums are amortized straight-line at each interest payment date.

a. Record the journal entry when the bonds were issued on January 1, 2017, make the necessary the journal entry to record the payment of bond interest on June 30, 2017, under each of the following assumptions:

1. The bonds were issued at 98. Round your answers to the nearest dollar.

2. The bonds were issued at 101. Round your answers to the nearest dollar.

b. Compute the net bond liability at December 31, 2017, under assumptions 1 and 2 above. Round to the nearest dollar.

c. Under which of the above assumptions, 1 or 2 would the investor’s effective rate of interest be higher? Explain.

Exercise 5

Speed World Cycles sells high-performance motorcycles and Motocross racers. One of Speed World’s most popular models is the Kazomma 900 dirt bike. During the current year, Speed World purchased eight of these cycles at the following costs:

Purchase Date                               Units Purchased      Unit Cost   Total Cost

July 1                                                                 2                  $4,950          $9,900

July 22                                                              3                    5,000           15,000

August 3                                                  3                        5,100           15,300

                                                                  ------                         ------------

                                                                      8                                             $40,200

On July 28, Speed World sold four Kazomma 900 dirt bikes to the Vince Wilson racing team. The remaining four bikes remained in inventory at September 30, the end of Speed World’s fiscal year.

Assume that Speed World uses a perpetual inventory system.

a. Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using the following cost flow assumptions:

1. Average cost

2. FIFO

3. LIFO

Show the number of units and the unit costs of each layer comprising the cost of goods sold and ending inventory.

b. Using the cost figures computed in part a. answer the following questions:

1. Which of the three cost flow assumptions will result in Speed World Cycles reporting the highest net income for the current year? Would this always be the case? Explain.

2. Which of the three cost flow assumptions will minimize the income taxes owed by Speed World Cycles for the year? Would you expect this usually to be the case? Explain.

3. May Speed World Cycles use the cost flow assumption that results in the highest net income for the current year in its financial statements, but use the cost flow assumption that minimizes taxable income for the current year in its income tax return? Explain.

The U.S. Geological Survey compiled historical data about Old Faithful Geyser (Yellowstone National Park) from 1870 to 1987. Let x₁ be a random variable that represents the time interval (in minutes) between Old Faithful eruptions for the years 1948 to 1952. Based on 9580 observations, the sample mean interval was x₁ = 61.8 minutes. Let x₂ be a random variable that represents the time interval in minutes between Old Faithful eruptions for the years 1983 to 1987. Based on 23,000 observations, the sample mean time interval was x₂ = 69.2 minutes. Historical data suggest that σ₁ = 8.49 minutes and σ₂ = 11.78 minutes. Let μ₁ be the population mean of x₁ and let μ₂ be the population mean of x₂.(a) Compute a 99% confidence interval for μ₁ – μ₂. (Use 2 decimal places.)

(b) Comment on the meaning of the confidence interval in the context of this problem. Does the interval consist of positive numbers only? negative numbers only? a mix of positive and negative numbers? Does it appear (at the 99% confidence level) that a change in the interval length between eruptions has occurred? Many geologic experts believe that the distribution of eruption times of Old Faithful changed after the major earthquake that occurred in 1959.

Because the interval contains only positive numbers, we can say that the interval length between eruptions has gotten shorter.Because the interval contains both positive and negative numbers, we can not say that the interval length between eruptions has gotten longer.     We can not make any conclusions using this confidence interval.Because the interval contains only negative numbers, we can say that the interval length between eruptions has gotten longer.

Organism 3

Field Notes: Specimen collected from shaded area along stream in South Cumberland State Park (Grundy County, TN)
Laboratory Analysis:
Body: Large leaves emerging from underground rhizome
Size: 63cm

Chromosomal Analysis: Plant body is diploid --chromosomes number of 44

Lignin test: Positive

Cuticle: Present

Leaves: Present -- large with branched veins. Underside has sori(containing haploid spores)
Roots: Present-----branch from the inside
Stem:Present--- vascular tissue(xylem and phloem)present



Life History: Diploid sporophyte dominant generation. Haploid spores germinate into heart-shaped, haploid, gametophyte. Water required for fertilization due to flagellated sperm; no seed is produced. Diploid zygote develops into sporophyte of life ---each bearing ether megasporangia or microsporangia but not both. Insects, especially beetles, appear important in pollination   

Question: Explain which domain, kingdom and phylum you believe this plant should be classified in.

Communication: The local media features the work of your team on their nightly news. During a live interview the reporter asks you " Apparently this plant requires water for fertilization, can you explain, can you explain why"?

Response: ------------------------

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.

Last year, the company sold 62,000 of these balls, with the following results:

1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level. (Round "Unit sales to break even" to the nearest whole unit and other answers to 2 decimal places.)

2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.)

3. Refer to the data in Required (2). If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $194,000, as last year? (Round your answer to the nearest whole unit.)

4. Refer again to the data in Required (2). The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs? (Round your answer to 2 decimal places.)

Selling price =

5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.)

6A. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $194,000, as last year? (Round your answer to the nearest whole unit.)

Number of balls =

6B. Assume the new plant is built and that next year the company manufactures and sells 62,000 balls (the same number as sold last year). Prepare a contribution format income statement and Compute the degree of operating leverage. (Round "Degree of operating leverage" to 2 decimal places.)