Develop an income statement in good form for Sanford Company for the first three months of 20x3.

Sanford Company

The Sanford Company had the following balance sheet as of December 31, 20x2. The transactions for the first three months of 20x3 are also presented along with other information about specific accounts.

Sanford Company

Balance Sheet

December 31, 20x2

Additional Information

Accounts Receivable

The following table indicates the historical breakout of accounts receivable

The company uses the gross method of recording all sales on accounts.

Marketable Securities

The interest rate earned on marketable securities is 6.0%.

Inventory

In 20x2, the company had used the gross method to record inventory purchases on account. As of January 1, 20x3, the company is using the net method to record inventory purchases on account.

Prepaid Insurance

A three-year insurance policy in the amount of $7,200 was purchased on July 1, 20x2.

Equipment

Equipment is depreciated at an average amount of $3,000 per month.

Building

The current building was purchased on January 1, ten years ago and has an expected 40-year life at which time its salvage value will be $40,000.

Intangible Assets

Intangible assets were initially valued at $80,000 and are being depreciated over 40 years at $2,000 per year.

Short-Term Notes Payable

The one-year short-term notes payable are due on March 1, 20x3. The interest rate is 5.0% which is payable at maturity.

Long-Term Notes Payable

The long-term notes payable are due in ten years. The interest rate on the notes is 4.5%.

Bonds Payable

The bonds payable mature in twenty years. The interest rate on the bonds is 4.0%.

Mortgage Payable

The following amortization schedule can be used for the January, 20x3 mortgage payment on the 7.0%, 30- year mortgage.

Capital Stock

The capital stock is common stock at $10 par value with 50,000 shares authorized, and 10,000 shares issued and outstanding.

Journal Entries

Jan 1 Equipment with a historical cost of $10,000 and an accumulated depreciation of $3,000 was sold for $6,000

Jan   2 Equipment with a historical cost of $20,000 and an accumulated depreciation of $18,000 was disposed of with an additional disposal cost of $1,300.

Jan   2 Sanford Company borrowed $24,000 on a short-term discounted 90 day, 3.0% noninterest-bearing note payable.

Jan 3 Sanford Company paid $18,000 in advance for the 6 month rental of a warehouse.

Jan 3 Equipment with a historical cost of $50,000 and an accumulated depreciation of $35,000 was traded for new similar equipment valued at $75,000. Sanford Company received $14,500 as a trade in for the old equipment, paid $7,500 and established a 4.5% long-term note payable for the balance due.

Jan 4 Equipment with a historical cost of $35,000 and an accumulated depreciation of $20,000 was traded for new dissimilar equipment valued at $60,000. The salvage value of the old equipment was $5,000 and the trade in value was $7,000. Sanford paid $4,000 for the equipment and established a 4.5% long-term note payable for the balance due.

Jan 5 Sanford Company declared a dividend of $2.00 per share payable on February 10, 20x3 to all shareholders of record on January 20, 20x3.

Jan 6 The amount in wages payable and taxes payable was paid in full.

Jan 8 Sanford Company paid a total of $18,000 on accounts payable and was able to take advantage of $1,500 in purchase discounts for early payment. The original inventory purchase was recorded at the full amount (gross method).

Jan 15 Cash sales for two weeks equaled $22,000. The cost of inventory sold equaled $12,000.

Jan 20 Supplies in the amount of $4,200 were purchased for cash.

Jan 21 A customer who owed $10,000 on an account receivable, agreed to sign a 60-day note receivable with an interest rate of 6.0%. The interest earned on the note will be paid at the maturity date of the note receivable.

Jan 29 The balance of $14,500 in accounts payable was paid.

Jan 30 The company purchased $45,000 of inventory on account with the terms 2/10, net 30. The company has decided to switch to the net method for all inventory purchases on account beginning in 20x3.

Jan 31 Cash sales for two weeks equaled $24,000. The cost of inventory sold equaled $13,000.

Jan 31 Sales on account for the month of January totaled $55,000 with the terms 2/10, net 30. The cost of inventory sold equaled $26,000.

Jan 31 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $4,000 of the revenue was earned in January.

Jan 31 Collected cash of $48,000 from the accounts receivable, plus there was a total sales discount of $1,000 for the payment of receivables within the ten day discount period.

Jan 31 Salary expenses in the amount of $14,000 and tax expenses in the amount of $8,000 were paid.

Jan 31 The utility bill of $2,500 was paid.

Jan 31 A bill in the amount of $3,600 for advertising expenses incurred during the month of January was received.

Jan 31 The monthly payment for January of the mortgage payable was made.

Feb 1 The Sanford Company made a new issue of 5,000 shares of common stock for cash. The market price of the stock was $40 per share.

Feb 2 A petty cash fund in the amount of $500 was established.

Feb 3 The Sanford Company bought back 1,000 shares of its own common stock for $40 per share.

Feb 8 The purchase of inventory on account on Jan 30th was paid in full.

Feb 10 Sanford Company sold the note receivable from Jan 21st to the bank, which discounted the note at 8.0%.

Feb 15 Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Feb 20 The company purchases $20,000 of inventory on account with the terms 2/10, net 30.

Feb 27 The company paid an advertising bill for $5,600 which included the February advertising expense of $2,000 plus the balance due from January.

Feb 28 Cash sales for two weeks equaled $25,000. The cost of inventory sold equaled $14,000.

Feb 28 The monthly payment for February of the mortgage payable was made.

Feb 28 The company collected cash of $59,000 from the accounts receivable, plus there was a total sales discount of $1,100 for the payment of receivables within the ten day discount period.

Feb 28 Salary expenses in the amount of $21,000 and tax expenses in the amount of $9,000 were paid.

Feb 28 The utility bill of $2,100 was paid.

Feb 28 Sales on account for the month of February totaled $60,000 with the terms 2/10, net 30. The cost of inventory sold equaled $30,000.

Mar 1 The short-term note payable that was due on March 1st plus all appropriate interest was paid.

Mar 3 The amount of the petty cash fund was increased by $200.

Mar 10 Supplies in the amount of $2,700 were purchased for cash.

Mar 15 Cash sales for two weeks equaled $27,000. The cost of inventory sold equaled $15,000.

Mar 20 Sanford Company reissued 300 shares of its own stock for $42 per share.

Mar 21 The bank notified Sanford Company that the note receivable from January 21st had not been paid. The bank collected the amount of the note plus the interest due and a $20 protest fee from Sanford Company. Sanford Company charged the full amount of the note receivable plus related fees against the customer’s account receivable balance.

Mar 25 The company purchased $50,000 of inventory on account with the terms 2/10, net 30.

Mar 28 The purchase of inventory on account on Feb 20th was paid in full.

Mar 29 The petty cash fund had $150 in cash and receipts in total amounts for the following expense categories: entertainment$160, travel $170, postage $90, and supplies $115. The petty cash fund was replenished.

Mar 30 Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Mar 30 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $9,000 of the revenue was earned in March.

Mar 31 Sales on account for the month of March totaled $67,000 with the terms 2/10, net 30. The cost of inventory sold equaled $36,000.

Mar 31 Salary expenses in the amount of $16,000 and tax expenses in the amount of $7,000 were paid.

Mar 31 Collected cash of $70,000 from the accounts receivable, plus there was a total sales discount of $1,200 for the payment of receivables within the ten day discount period.

Mar 31 A warehouse building was acquired for $250,000. Closing costs on the acquisition equaled $7,000, and there were costs of $10,300 to get the building into an operational condition to be used by Sanford Company. Employee salaries specifically related to the building renovation were an additional $5,400. This salary expense was part of the normal monthly expenses and would have been incurred regardless of whether the employees worked on the warehouse or did other activities within the company. Sanford Company paid $100,000 in cash as a down payment with the balance due being added to the mortgage payable account.

Mar 31 The utility bill of $3,000 was paid.

Mar 31 Sanford Company repaid the 90 day discounted note payable from January 2nd in full.

Mar 31 The equipment depreciation entry for the three months of 20x3 was completed.

Mar 31 The depreciation entry for the building for the months of January, February, and March was entered.

Mar 31 The amortization of intangible assets for the three months of 20x3 was completed.

Mar 31 The bad debt expense based on the aging schedule for accounts receivable was determined for the three month period.

Mar 31 Salary expenses incurred during the month of March but not yet paid equaled $8,400 and tax expenses equaled $2,800.

Mar 31 A physical inventory of supplies indicated a total amount of $5,000 of supplies still on hand.

Mar 31 A customer sent an advance payment of $10,000 for the use of special equipment in April and May.

Mar 31 The amount of rent expense for the warehouse for the first three months of 20x3 was recognized.

Mar 31 Sanford Company provided services to a customer in the amount of $3,000 during March but a bill has not been sent.

Mar 31 The amount of insurance expense for the first three months of 20x3 was recognized.

Mar 31 The amount of interest earned on marketable securities for the three months of 20x3 was recognized.

Mar 31 The amount of interest expense for the total long-term notes payable for the first three months of 20x3 was recognized.

Mar 31 The amount of interest expense for the bonds payable for the three months of 20x3 was recognized.

Mar 31 The monthly payment for March of the mortgage payable was made.

Sanford Company

The Sanford Company had the following balance sheet as of December 31, 20x2. The transactions for the first three months of 20x3 are also presented along with other information about specific accounts.

Sanford Company

Balance Sheet

December 31, 20x2

Additional Information

Accounts Receivable

The following table indicates the historical breakout of accounts receivable

The company uses the gross method of recording all sales on accounts.

Marketable Securities

The interest rate earned on marketable securities is 6.0%.

Inventory

In 20x2, the company had used the gross method to record inventory purchases on account. As of January 1, 20x3, the company is using the net method to record inventory purchases on account.

Prepaid Insurance

A three-year insurance policy in the amount of $7,200 was purchased on July 1, 20x2.

Equipment

Equipment is depreciated at an average amount of $3,000 per month.

Building

The current building was purchased on January 1, ten years ago and has an expected 40-year life at which time its salvage value will be $40,000.

Intangible Assets

Intangible assets were initially valued at $80,000 and are being depreciated over 40 years at $2,000 per year.

Short-Term Notes Payable

The one-year short-term notes payable are due on March 1, 20x3. The interest rate is 5.0% which is payable at maturity.

Long-Term Notes Payable

The long-term notes payable are due in ten years. The interest rate on the notes is 4.5%.

Bonds Payable

The bonds payable mature in twenty years. The interest rate on the bonds is 4.0%.

Mortgage Payable

The following amortization schedule can be used for the January, 20x3 mortgage payment on the 7.0%, 30- year mortgage.

Capital Stock

The capital stock is common stock at $10 par value with 50,000 shares authorized, and 10,000 shares issued and outstanding.

Journal Entries

Jan 1 Equipment with a historical cost of $10,000 and an accumulated depreciation of $3,000 was sold for $6,000

Jan   2 Equipment with a historical cost of $20,000 and an accumulated depreciation of $18,000 was disposed of with an additional disposal cost of $1,300.

Jan   2 Sanford Company borrowed $24,000 on a short-term discounted 90 day, 3.0% noninterest-bearing note payable.

Jan 3 Sanford Company paid $18,000 in advance for the 6 month rental of a warehouse.

Jan 3 Equipment with a historical cost of $50,000 and an accumulated depreciation of $35,000 was traded for new similar equipment valued at $75,000. Sanford Company received $14,500 as a trade in for the old equipment, paid $7,500 and established a 4.5% long-term note payable for the balance due.

Jan 4 Equipment with a historical cost of $35,000 and an accumulated depreciation of $20,000 was traded for new dissimilar equipment valued at $60,000. The salvage value of the old equipment was $5,000 and the trade in value was $7,000. Sanford paid $4,000 for the equipment and established a 4.5% long-term note payable for the balance due.

Jan 5 Sanford Company declared a dividend of $2.00 per share payable on February 10, 20x3 to all shareholders of record on January 20, 20x3.

Jan 6 The amount in wages payable and taxes payable was paid in full.

Jan 8 Sanford Company paid a total of $18,000 on accounts payable and was able to take advantage of $1,500 in purchase discounts for early payment. The original inventory purchase was recorded at the full amount (gross method).

Jan 15 Cash sales for two weeks equaled $22,000. The cost of inventory sold equaled $12,000.

Jan 20 Supplies in the amount of $4,200 were purchased for cash.

Jan 21 A customer who owed $10,000 on an account receivable, agreed to sign a 60-day note receivable with an interest rate of 6.0%. The interest earned on the note will be paid at the maturity date of the note receivable.

Jan 29 The balance of $14,500 in accounts payable was paid.

Jan 30 The company purchased $45,000 of inventory on account with the terms 2/10, net 30. The company has decided to switch to the net method for all inventory purchases on account beginning in 20x3.

Jan 31 Cash sales for two weeks equaled $24,000. The cost of inventory sold equaled $13,000.

Jan 31 Sales on account for the month of January totaled $55,000 with the terms 2/10, net 30. The cost of inventory sold equaled $26,000.

Jan 31 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $4,000 of the revenue was earned in January.

Jan 31 Collected cash of $48,000 from the accounts receivable, plus there was a total sales discount of $1,000 for the payment of receivables within the ten day discount period.

Jan 31 Salary expenses in the amount of $14,000 and tax expenses in the amount of $8,000 were paid.

Jan 31 The utility bill of $2,500 was paid.

Jan 31 A bill in the amount of $3,600 for advertising expenses incurred during the month of January was received.

Jan 31 The monthly payment for January of the mortgage payable was made.

Feb 1 The Sanford Company made a new issue of 5,000 shares of common stock for cash. The market price of the stock was $40 per share.

Feb 2 A petty cash fund in the amount of $500 was established.

Feb 3 The Sanford Company bought back 1,000 shares of its own common stock for $40 per share.

Feb 8 The purchase of inventory on account on Jan 30th was paid in full.

Feb 10 Sanford Company sold the note receivable from Jan 21st to the bank, which discounted the note at 8.0%.

Feb 15 Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Feb 20 The company purchases $20,000 of inventory on account with the terms 2/10, net 30.

Feb 27 The company paid an advertising bill for $5,600 which included the February advertising expense of $2,000 plus the balance due from January.

Feb 28 Cash sales for two weeks equaled $25,000. The cost of inventory sold equaled $14,000.

Feb 28 The monthly payment for February of the mortgage payable was made.

Feb 28 The company collected cash of $59,000 from the accounts receivable, plus there was a total sales discount of $1,100 for the payment of receivables within the ten day discount period.

Feb 28 Salary expenses in the amount of $21,000 and tax expenses in the amount of $9,000 were paid.

Feb 28 The utility bill of $2,100 was paid.

Feb 28 Sales on account for the month of February totaled $60,000 with the terms 2/10, net 30. The cost of inventory sold equaled $30,000.

Mar 1 The short-term note payable that was due on March 1st plus all appropriate interest was paid.

Mar 3 The amount of the petty cash fund was increased by $200.

Mar 10 Supplies in the amount of $2,700 were purchased for cash.

Mar 15 Cash sales for two weeks equaled $27,000. The cost of inventory sold equaled $15,000.

Mar 20 Sanford Company reissued 300 shares of its own stock for $42 per share.

Mar 21 The bank notified Sanford Company that the note receivable from January 21st had not been paid. The bank collected the amount of the note plus the interest due and a $20 protest fee from Sanford Company. Sanford Company charged the full amount of the note receivable plus related fees against the customer’s account receivable balance.

Mar 25 The company purchased $50,000 of inventory on account with the terms 2/10, net 30.

Mar 28 The purchase of inventory on account on Feb 20th was paid in full.

Mar 29 The petty cash fund had $150 in cash and receipts in total amounts for the following expense categories: entertainment$160, travel $170, postage $90, and supplies $115. The petty cash fund was replenished.

Mar 30 Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Mar 30 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $9,000 of the revenue was earned in March.

Mar 31 Sales on account for the month of March totaled $67,000 with the terms 2/10, net 30. The cost of inventory sold equaled $36,000.

Mar 31 Salary expenses in the amount of $16,000 and tax expenses in the amount of $7,000 were paid.

Mar 31 Collected cash of $70,000 from the accounts receivable, plus there was a total sales discount of $1,200 for the payment of receivables within the ten day discount period.

Mar 31 A warehouse building was acquired for $250,000. Closing costs on the acquisition equaled $7,000, and there were costs of $10,300 to get the building into an operational condition to be used by Sanford Company. Employee salaries specifically related to the building renovation were an additional $5,400. This salary expense was part of the normal monthly expenses and would have been incurred regardless of whether the employees worked on the warehouse or did other activities within the company. Sanford Company paid $100,000 in cash as a down payment with the balance due being added to the mortgage payable account.

Mar 31 The utility bill of $3,000 was paid.

Mar 31 Sanford Company repaid the 90 day discounted note payable from January 2nd in full.

Mar 31 The equipment depreciation entry for the three months of 20x3 was completed.

Mar 31 The depreciation entry for the building for the months of January, February, and March was entered.

Mar 31 The amortization of intangible assets for the three months of 20x3 was completed.

Mar 31 The bad debt expense based on the aging schedule for accounts receivable was determined for the three month period.

Mar 31 Salary expenses incurred during the month of March but not yet paid equaled $8,400 and tax expenses equaled $2,800.

Mar 31 A physical inventory of supplies indicated a total amount of $5,000 of supplies still on hand.

Mar 31 A customer sent an advance payment of $10,000 for the use of special equipment in April and May.

Mar 31 The amount of rent expense for the warehouse for the first three months of 20x3 was recognized.

Mar 31 Sanford Company provided services to a customer in the amount of $3,000 during March but a bill has not been sent.

Mar 31 The amount of insurance expense for the first three months of 20x3 was recognized.

Mar 31 The amount of interest earned on marketable securities for the three months of 20x3 was recognized.

Mar 31 The amount of interest expense for the total long-term notes payable for the first three months of 20x3 was recognized.

Mar 31 The amount of interest expense for the bonds payable for the three months of 20x3 was recognized.

Mar 31 The monthly payment for March of the mortgage payable was made.

Required

1.   Supply journal entries for each of the transactions. The numbers in the journal entries can be rounded to the nearest dollar.

2.   Develop an income statement in good form for Sanford Company for the first three months of 20x3.

ABC Ltd is a wholesaler of furniture which has been in operation for ten years. It buys furniture from five major manufacturers and sells them to a range of customers. The company currently has a customer base of over 500 customers most of which are credit customers. The receivables balance comprises customers owing up to $2,000,000 to smaller balances of about $10,000, all with many different due dates for payments and credit limits. The level of receivables is considerably higher than last year and there are concerns about the creditworthiness of some customers.

The company has only recently computerised its operations including its accounting system. Manual invoices, receipts and cheques have been replaced with computer-generated documents. The sub-ledgers are now maintained in the accounting software which have facilitated more timely generation of statements much to the delight of customers. The sales process is initiated by a Purchase Order from the customer which is used to raise a system generated Sales Invoice and Delivery Slip. A copy of the Delivery Slip is given to the Security at the gate for logging and check off to allow passage of goods through the gate; another copy of the Delivery Slip is given for the customer to sign and then returned to the Sales Dept. All information is stored on ABC Ltd’s computer systems. There is no backup of data off site. The client’s staff are helpful although they cannot confirm completeness of documentation for the system.

You are the audit senior in charge assigned for ABC Ltd’s audit and you are in the process of planning the current year’s audit. You are contemplating the changes in the client’s audit environment and the impact that these changes will have on the audit risk and the audit methodology. Your audit assistant is curious why it is necessary to plan the audit from one year to the next. Why not just copy the previous year’s workpapers?

3. (a) Your audit plan notes that you will be testing the system of internal controls for the ‘three Es’. Explain the ‘three Es’ and the impact these will have on the audit if positive and if negative.

(b) State the audit procedure you will be using for the following:

i) To test the control over completeness of sales

ii) To test the accuracy and existence of receivables balances

(c) List the set of management assertions for “Sales” and “Accounts Receivable” which you will be testing.

a. A US corporation has an account payable to an unrelated Irish company in 90 days. The amount of the payable is €500,000. The spot exchange rate for the euro is EUR/USD 1.2131. The company’s combined federal and state income tax rate is 27.3%; the Irish corporate income tax rate is 12.5%. The company expects the exchange rate for the euro to decline to 1.2030 prior to the account’s due date. When should the company make the payment? Explain.

b. If the payee on the account is an affiliated corporation, when should the company make the payment? Explain.

c. What is the payment described in part b called? How can the company justify the amount of the payment if it is challenged by the US Internal Revenue Service or Ireland’s Revenue authority?

Acme 3-D Printing Co. custom produces products for customers by using computerized 3D printing. An employee (clerk) at Acme takes orders from customers, each order contains the specifications for one “print job”: one custom 3D object to be manufactured. When the order is received, the employee immediately collects cash payment – no credit is extended to customers. The order takes about one week to put into production as a print job. The print job is a manufacturing process consisting of the application of different colored plastics which are shaped and milled into a single 3-dimensional object using various machine processes. Acme maintains information about its cash accounts, orders, print jobs, the employees (machinists) who perform each print job, customers, the quantities of different colored plastics used in each print job, and the processes that are performed on each print job. Each print job is manufactured by one employee who performs all the processes that are necessary for that print job. Print jobs manufactured for customers require one or more colored plastics, and one or more processes. Each customer could have many orders and many print jobs throughout the year; each print job requires a new order. All company data is currently contained in the following database:

CASH (ACCOUNT-NO, ACCT-TYPE, CASH-BALANCE)

ORDERS (ORDER-NO, ORDER-DATE, SPECS, ACCOUNT-NO*)

PRINT_JOB (JOB-NO, JOB-DATE, EMPLOYEE-NO, EMPLOYEE-NAME, MFG-TIME, CUSTOMER-NO, CUSTOMER-NAME, CUSTOMER-ADDRESS, PROCESS-NO*, ORDER-NO*)

COLORED_PLASTICS (JOB-NO*, CP-NO, CP-DESCRIPTION, QUANTITY-USED)

PROCESSES (PROCESS-NO, PROCESS-DESCRIPTION)

Definitions of some fields: Any -NO field is the unique identifier of a database entity SPECS is a text field that contains all the print job specifications taken during the order CP stands for “colored plastic” QUANTITY-USED field indicates the quantity of each colored plastic used on each print job. JOB-DATE is the date on which the print job is manufactured MFG-TIME is the amount of manufacturing time the entire print job takes

(1a.) Does this database contain a transitive dependency? If yes, describe ONE transitive dependency by naming the fields and how they create the dependency.

(1b.) Does this database contain a partial dependency? If yes, describe ONE partial dependency by naming the fields and how they create the dependency.

(1c.) Does this database contain a potential repeating group? If yes, describe ONE repeating group by naming a field that would repeat.

Q.1) Emirates Steel Company reported the following accounting values:

Required:

Part 1:

a. Compute contribution margin.

b. Compute contribution margin percentage.

c. Compute gross margin.

d. Compute gross margin percentage.

e. Compute operating income.

Part-2:

Write a note on the above retrieved ratios and give comments whether investment in the shares of M/s Emirates Steel Company is a prudent decision as an investor or not? In both cases, respond why you taken decision of ‘Yes’ or ‘No’ (give reasons)?

Q.2) Pepsi Cola Company wants to estimate the cost for each process. It is a beverage manufacturing unit and only produce different flavors of beverages.

Required:

a. Classify each of the following costs as either direct or indirect with respect to production process.

b. Classify each of the following costs as either fixed or variable with respect to Pepsi Cola Company per day.

There are five revenue recognition? criteria.

1.Identify the contract with the customer.

2.Identify the performance obligations.

3.Determine the transaction price.

4.Allocate the transaction price to performance obligations.

5.Recognize revenue in accordance with performance.

There are some situations.a.
a.An apartment owner receives a deposit of? $1200 equal to one? month's rent.
b.An insurance company receives annual premiums for fire insurance on June 25 for coverage beginning July 1.
c.A city transit authority issues? 200,000 monthly passes at? $80 each for sale at various retailers. Retailers act as consignees for these passes.
d.A city transit authority sells? 50,000 monthly passes at? $80 each to transit riders at its own retail? offices/stores.e.
e.A provincial lottery corporation delivers 10 million? scratch-and-win cards to retailers. The cards retail for? $2 and generate a commission of? $0.20 per card for the retailer. The retailer can return unsold cards to the lottery corporation.

Just  identify which revenue recognition? criterion/criteria is/are NOT met at the point of? sale, preventing the recognition of revenue at that time

1. Heights of all tall buildings in San Francisco 500 feet or higher.

a) Is this a sample or population? _____ 500 525 529 529 538 541 550 564 565 569 570 573 600 600 641 645 695 779 853

b) Mean __________

c) Standard Deviation ___________

d) Variance ____________

e) 5# Summary ______________________________________

f) IQR _____________

g) Upper fence ____________

h) Lower fence ___________

i) Are there any outliers? _________

If so, identify them: ______________________

j) Make a stemplot k) Draw a boxplot showing any outliers

i) Shape? ______________________ (Leaf unit 10)

2. State the Empirical Rule for symmetric and near normal distributions.

Approximately _____% of the data lie within ___ standard deviation of the mean.

Approximately _____% of the data lie within ___ standard deviations of the mean.

Approximately _____% of the data lie within ___ standard deviations of the mean.

3. Class test scores are normally distributed with mean 64 and standard deviation 10.

Find the proportion of scores using the Empirical Rule.

Make a sketch for each problem.

a) X > 74 a) 44 < X < 74

b) X < 44

Peter Krone is the chief financial officer (CFO) of Echo Inc. The firm was founded seven years ago to provide educational services for the rapidly expanding primary and secondary school markets. Although Echo Inc. has done well, the firm's founder believes that an industry shakeout is imminent. To survive, Echo Inc. must grab market share now, and this will require a large infusion of new capital. Because he expects earnings to continue rising sharply and looks for the stock price to follow suit, Mr. Krone does not think it would be wise to issue new common stock at this time. On the other hand, interest rates are currently high by historical standards, the interest payments on a new debt issue would be prohibitive. Thus, he has chosen to finance the needed capital using bonds with warrants. Mr. Krone estimates that Echo Inc. could issue a bond-with-warrants package consisting of a 20-year bond and 27 warrants. Each warrant would have a strike price of $25 and 10 years until expiration. It is estimated that each warrant, when detached and traded separately, would have a value of $5. The coupon on a similar bond but without warrants would be 10%.

1- what coupon rate should be set on the bond with warrants if the total package is to sell for $1,000 ?

2-if Echo inc. issues 100,000 bond with warrant packages how much cash will Echo Inc receive when the warrants are exercised ?

3- how much shares of stock will be outstanding after the warrants are exercised ? ( Echo Inc. currently has 20 million shares outstanding )