Short Answer #1: Tally needs to choose between 2 health insurance plans. Assume Tally will use $3,500 worth of medical services next year. Is she better off choosing plan A or plan B? Explain and define each of the key terms.
Plan A:
i. Monthly premium: $250
ii. Co-pay: $0
iii. Co-insurance (after deductible): 15%
iv. Deductible: $1,500
v. Max out-of-pocket: $5,000
Plan B:
vi. Monthly premium: $125
vii. Co-pay: $0
viii. Co-insurance (after deductible): 25%
ix. Deductible: $2,000
x. Max out-of-pocket: $7,000
In: Accounting
The relationship between the amount of remaining carbon monoxide (CO) in an individual’s lungs and the time since that person last smoked a cigarette can be summarized using a linear regression approach.
(a) Write down a simple linear regression model and the underlying assumptions. The following summary data was collected from 12 different smokers.
x = time since last smoked a cigarette (hours) y = amount of CO in ppm
n=12, x=1.88 sxx =25.8, syy =1805 SSE=877.4 Fitted regression line: ?̂ = ??. ?? − ?. ??? ?
(b) State the values of ? and ? from the fitted regression equation. Not that ? and ? are the estimates of intercept parameter ? and slope parameter ? respectively.
(c) What is the estimated change in the remaining CO in the lungs if the time since last smoked is increased by 1 hour?
(d) State the hypotheses to test the significance of the linear regression.
(e) Compute MSE.
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(f) Calculate the test statistic, state the degrees of freedom, and find the p-value to test the hypotheses in (c).
(g) Would you reject H0 or fail to reject H0 at 5% level of significance?
(h) What do you conclude about the regression of CO in the lungs on time since last
smoked?
(i) Compute the coefficient of determination, r2 using 1-SSE/Syy. Interpret the value.
(j) Predict the amount of remaining CO in the lungs for an elapsed time of 2.25 hours
after smoking.
(k) What is the residual at ?0 = 2.25 if the corresponding observed amount CO is
28ppm?
(l) Estimate the mean amount of CO in the lungs for an elapsed time of 2.25 hours.
(m) Construct a 95% confidence interval for the true mean amount of CO in the lungs
for an elapsed time of 2.25 hours.
In: Statistics and Probability
Purpose: To enable students in utilising financial ratios for the purpose of evaluating a firm’s financial performance and financial position as well as in recognising firms facing financial distress and using ratios to make decisions for improvement.
Requirement: Financial Statement Analysis
A Co. and B Co. are competitors in a particular manufacturing sector. An extract of financial statements for each company is as follows: Use them in a ratio analysis that compares the companys’ financial leverage and profitability.
Item A Co. B Co.
Total assets RM10,000,000 RM10,000,000
Total equity (all common) 9,000,000 5,000,000
Total debt 1,000,000 5,000,000
Annual interest 100,000 500,000
Total sales 25,000,000 25,000,000
EBIT 6,250,000 6,250,000
Earnings available for
common stockholders 3,690,000 3,450,000
Required:
Calculate the following debt and coverage ratios for the two companies. Discuss briefly their financial risk and ability to cover the costs in relation to each other.
Debt ratio.
Times interest earned ratio.
(b) Calculate the following profitability ratios for the two companies. Discuss briefly their profitability relative to each other.
Operating profit margin. (1.5 marks)
Net profit margin. (1.5 marks)
Return on total assets. (1.5 marks)
Return on common equity. (1.5 marks)
(c) In what way has the larger debt of B Co. made it more profitable than A Co.? What are the risks that B Co.’s investors undertake when they choose to purchase its stock instead of A Co.’s?
(d) “While ratio analysis can provide some useful information concerning a company’s operations and financial condition, it does have limitations”. Discuss briefly.
(Total:15 marks)
In: Accounting
On January 1, 1996, ParkOne Co. (lessee) signs a 10-year noncancelable lease agreement to lease a storage building from DIY Storage Company (lessor). The following information pertains to this lease agreement:
• The agreement requires equal rental payments of $76,332 beginning on December 31, 1996. The annual payment includes $3,000 as reimbursement of property taxes.
• The fair value of the building on January 1, 1996 is $453,000. On DIY’s book, it has a cost of $400,000.
• The building has an estimated useful life of 15 years. The estimated residual value at the end of the lease term of $60,000 is guaranteed by ParkOne. ParkOne Co. depreciates similar buildings on the straight-line method.
• The lease is nonrenewable. At the termination of the lease term the building reverts back to the lessor. • There is no uncertainty concerning rental and all other payments.
• ParkOne’s incremental borrowing rate is 11% per year. The lessor’s implicit interest rate is 11%, too.
Required: Based on this information answer the following questions. Show all computations and round amounts to the nearest dollar.
1. What kind of lease is it for ParkOne Co.? Why?
2. Prepare the journal entry ParkOne Co. would make with respect to the lease on January 1, 1996.
3. Prepare all entries ParkOne Co. would make with respect to the lease obligation and leased asset on December 31, 1996.
4. What kind of lease is it for DIY Storage Co? 5. Write the journal entry DIY Storage Co. will make on 1/1/96. (Use the Net method.) 6. Write the journal entries DIY Storage Co. will make on 12/31/96 when it receives the first payment.
In: Accounting
On January 1, 1996, ParkOne Co. (lessee) signs a 10-year noncancelable lease agreement to lease a storage building from DIY Storage Company (lessor). The following information pertains to this lease agreement:
• The agreement requires equal rental payments of $76,332 beginning on December 31, 1996. The annual payment includes $3,000 as reimbursement of property taxes.
• The fair value of the building on January 1, 1996 is $453,000. On DIY’s book, it has a cost of $400,000.
• The building has an estimated useful life of 15 years. The estimated residual value at the end of the lease term of $60,000 is guaranteed by ParkOne. ParkOne Co. depreciates similar buildings on the straight-line method.
• The lease is nonrenewable. At the termination of the lease term the building reverts back to the lessor. • There is no uncertainty concerning rental and all other payments.
• ParkOne’s incremental borrowing rate is 11% per year. The lessor’s implicit interest rate is 11%, too.
Required: Based on this information answer the following questions. Show all computations and round amounts to the nearest dollar.
1. What kind of lease is it for ParkOne Co.? Why?
2. Prepare the journal entry ParkOne Co. would make with respect to the lease on January 1, 1996.
3. Prepare all entries ParkOne Co. would make with respect to the lease obligation and leased asset on December 31, 1996.
4. What kind of lease is it for DIY Storage Co? 5. Write the journal entry DIY Storage Co. will make on 1/1/96. (Use the Net method.) 6. Write the journal entries DIY Storage Co. will make on 12/31/96 when it receives the first payment.
In: Accounting
Hudson Co. reports the contribution margin income statement for 2017.
| HUDSON CO. | |||
| Contribution Margin Income Statement | |||
| For Year Ended December 31, 2017 | |||
| Sales (9,900 units at $225 each) | $ | 2,227,500 | |
| Variable costs (9,900 units at $180 each) | 1,782,000 | ||
| Contribution margin | $ | 445,500 | |
| Fixed costs | 342,000 | ||
| Pretax income | $ | 103,500 | |
Assume the company is considering investing in a new machine that will increase its fixed costs by $42,000 per year and decrease its variable costs by $9 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.
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If the company raises its selling price to $240 per unit.
1. Compute Hudson Co.'s contribution margin per
unit.
2. Compute Hudson Co.'s contribution margin
ratio.
3. Compute Hudson Co.'s break-even point in
units.
4. Compute Hudson Co.'s break-even point in sales
dollars.
The marketing manager believes that increasing advertising costs by $84,000 in 2018 will increase the company’s sales volume to 11,300 units. Prepare a forecasted contribution margin income statement for 2018 assuming the company incurs the additional advertising costs.
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In: Accounting
Problem 1 (3 + 3 + 3 = 9) Suppose you draw two cards from a deck of 52 cards without replacement. 1) What’s the probability that both of the cards are hearts? 2) What’s the probability that exactly one of the cards are hearts? 3) What’s the probability that none of the cards are hearts?
Problem 2 (4) A factory produces 100 unit of a certain product and 5 of them are defective. If 3 units are picked at random then what is the probability that none of them are defective?
Problem 3 (3+4=7) There are 3 bags each containing 100 marbles. Bag 1 has 75 red and 25 blue marbles. Bag 2 has 60 red and 40 blue marbles. Bag 3 has 45 red and 55 blue marbles. Now a bag is chosen at random and a marble is also picked at random. 1) What is the probability that the marble is blue? 2) What happens when the first bag is chosen with probability 0.5 and other bags with equal probability each?
Probem 4 (3+3+4=10) Before each class, I either drink a cup of coffee, a cup of tea, or a cup of water. The probability of coffee is 0.7, the probability of tea is 0.2, and the probability of water is 0.1. If I drink coffee, the probability that the lecture ends early is 0.3. If I drink tea, the probability that the lecture ends early is 0.2. If I drink water, the lecture never ends early. 1) What’s the probability that I drink tea and finish the lecture early? 2) What’s the probability that I finish the lecture early? 3) Given the lecture finishes early, what’s the probability I drank coffee?
Problem 5 (4+4+4=12) We roll two fair 6-sided dice. Each one of the 36 possible outcomes is assumed to be equally likely. 1) Find the probability that doubles were rolled. 2) Given that the roll resulted in a sum of 4 or less, find the conditional probability that doubles were rolled. 3) Given that the two dice land on different numbers, find the conditional probability that at least one die is a 1. Problem 6 (8) For any events A, B, and C, prove the following equality: P(B|A) P(C|A) = P(B|A ∩ C) P(C|A ∩ B)
In: Math
Prepare journal entries to record the following merchandising transactions of Parker's, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Allen.)
| Jul. | 1 | Purchased merchandise from Allen Company for $10,600 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1. | ||
| Jul. | 2 | Sold merchandise to Garcia Co. for $3,200 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $1,920. | ||
| Jul. | 3 | Paid $1,045 cash for freight charges on the purchase of July 1. | ||
| Jul. | 8 | Sold merchandise that had cost $3,800 for $6,300 cash. | ||
| Jul. | 9 | Purchased merchandise from Clark Co. for $4,500 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9. | ||
| Jul. | 11 | Returned $900 of merchandise purchased on July 9 from Clark Co. and debited its account payable for that amount. | ||
| Jul. | 12 | Received the balance due from Garcia Co. for the invoice dated July 2, net of the discount. | ||
| Jul. | 16 | Paid the balance due to Allen Company within the discount period. | ||
| Jul. | 19 | Sold merchandise that cost $4,100 to Perez Co. for $5,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19. | ||
| Jul. | 21 | Gave a price reduction (allowance) of $1,200 to Perez Co. for merchandise sold on July 19 and credited Perez’s accounts receivable for that amount. | ||
| Jul. | 24 | Paid Clark Co. the balance due, net of discount. | ||
| Jul. | 30 | Received the balance due from Perez Co. for the invoice dated July 19, net of discount. | ||
| Jul. | 31 | Sold merchandise that cost $7,000 to Garcia Co. for $11,600 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31. |
For each transaction, indicate the impact each item had on income and the dollar amount of the change in income, if any. Input decreases to net income as minus sign. Upon completion, compare the gross profit with the amount reported on the partial income statement.
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In: Accounting
Dove Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $250,000, $320,000, and $410,000, respectively, for September, October, and November. The company expects to sell 25% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale and 30% in the month following the sale.
The cash collections expected in October are
| a. |
$320,000 |
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| b. |
$304,250 |
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| c. |
$248,000 |
|
| d. |
$382,500 |
In: Accounting
In: Accounting