Apple is interested in learning how potential customers view its newest product rollout. To do this, it collected surveys gauging respondents' perceived likelihood of purchase (out of 100), along with their age and income levels. Using these data, describe using regression how the likelihopod of purchase relates to age and income.

Revenue Recognition for ABC Software Company under ASC 606

ABC COMPANY was stumped by U.S. accounting rules for revenue recognition and gave up trying to comply with them.  The Japanese giant recognized this would lead to the delisting of its ADR shares on NASDAQ.  ABC also said it would be able to file its 2006 annual report under U.S. GAAP and it couldn’t vouch for its financial statements since 2000.  ABC COMPANY said a restatement was not practicable because of the complexities.  ABC noted that its financial statements under Japanese GAAP are current and not affected by this announcement.  

Under accounting principles generally accepted in the United States of America, revenue recognition rules are complicated for software companies whose contracts combine the sale of software with maintenance service agreements.  Previously, a standard called SOP 97-2 for companies wishing to recognize the software-sales revenue up front must perform an analysis of such contracts that provides “vendor specific objective evidence” (VSOP) of consistent treatment of sales and service.  That analysis, which ABC COMPANY says it has been unable to complete, required before portions of revenue from a single contract can be broken out and recognized at different times.  ABC says it is unable to complete the VSOE analysis for its auditor in time to file the annual report for the year ending March 31, 2006 even though ABC had previously been warned by NASDAQ and received an extension.  

On June 17, 2008 the Securities and Exchange Commission instituted proceedings against ABC pursuant to the Securities and Exchange Act of 1934.  The resulting order revoked the U.S. registration of each class of ABC’s registered securities and ordered ABC to cease and desist from committing certain violations based on ABC’s failure to file annual reports and maintain sufficient internal controls, and failure to make and keep accurate books and records.  Following the revocation order ABC securities remain listed for trading, and actively trade, in Japan.  ABC's American Depositary Receipt Program was subsequently terminated as of March 31, 2010.  

Recently, new revenue recognition standards have been adopted in the USA.  ABC’s management would like your advice on whether it might be a good time to apply for the company to be listed on a US stock exchange by complying with revenue recognition requirements.

ABC has the following sources of income that should be evaluated.

1. Licensing of product.  Customers pay an upfront fee of $12,000 for 12 months to use ABC’s software.  Customers can access ABC’s software at any time during the period.  The contract term starts on July 1 and go through June 30.  ABC provides hosting and maintenance of the site.
2. Implementation . ABC software will provide training, project management, data conversion and process consulting to onboard new clients. Implementation services typically require full-time work for 3-months on average with a team of 3 providing hourly billing at a rate of $150 per hour.
3. Hardware sales.  ABC is a reseller of key components.  ABC has no inventory obligations and drop ships produce from the manufacturer’s distribution site.  The mark-up on hardware sales is 10% for ABC.

Other considerations:

Does the customer have the ability to forgo the hosting provided by the Company and instead host it on their own servers, or some other remote server (e.g., AWS, Microsoft Azure)
Yes, this is an option we make available, though we highly discourage it. Out of 2000+ customers, less than two dozen forgo the hosting services.

·         How integral are the implementation services to using the software?
Highly integral. We provide no generic services. For example, as part of implementation, we provide an overview of the ABC database, but we do not educate customers on relational database management systems.

·         Could the customer source the implementation services from some other third party?
A customer has only one option for sourcing implementation services: 1) Company ABC if the system was purchased through direct sales, or 2) a channel partner if the system was purchased through that channel partner.

·         Does ABC perform regular upgrades to the software?
Yes

·         Does the customer have to pay separately to get access to such upgrades?
No, upgrades are included as part of the annual license subscription.

·         If ABC provides upgrades, are they promised (explicitly or implicitly) at any sort of regular cadence?
Releases (i.e., upgrades) are delivered every four weeks like clockwork.

·         Is there a minimum number of upgrades promised or implied during the term of the contract?
License subscriptions run on an annual basis, though contracts are often times multiple-year subscriptions. Thirteen releases per year are implied in an annual subscription.

Explain the following

1.       A.  Would the license meet the definition of a performance obligation?

B. Would the license be classified as a license of functional intellectual property or symbolic intellectual property?

C. Would the revenue be recognized at the point in time that access to the license is granted to the customer or over the license term?

2.          Discuss the revenue recognition for Implementation

3.          Discuss revenue recognition for Hardware sales.

4.          Discuss a factor that could change one of your answers.

What must cash flow from financing have been in 2008 for Interceptors, Inc.?

$33

$43

$10

$40

2. Let’s use the data from the sea ice extent by year. a. Do a t-test to determine if the slope = 0, give null and alternative hypotheses, test statistic, pvalue, decision and interpretation. b. Construct a residual plot vs fitted values. c. Look at a histogram of the residuals. d. Are there any obvious outliers? Find that observation that is the most glaring and find out how many standard deviations it is from the mean. Can this be justified to be removed? e. Are the assumptions for regression met? (Linearity, Constant Standard Deviation and Normality of errors). If not, which one is violated.

data:

Year Extent

1980 9.18

1981 8.86

1982 9.42

1983 9.33

1984 8.56

1985 8.55

1986 9.48

1987 9.05

1988 9.13

1989 8.83

1990 8.48

1991 8.54

1992 9.32

1993 8.79

1994 8.92

1995 7.83

1996 9.16

1997 8.34

1998 8.45

1999 8.6

2000 8.38

2001 8.3

2002 8.16

2003 7.85

2004 7.93

2005 7.35

2006 7.54

2007 6.04

2008 7.35

2009 6.92

2010 6.98

2011 6.46

2012 5.89

2013 7.45

2014 7.23

2015 6.97

2016 6.08

2017 6.77

2018 6.13

2019 5.66

By using the definition and discussing what is relevant to the situation, interpret each of the following for both the coffee and tea data. Also, compare each for coffee and tea. Be sure to include the relevant information (state the value of or, in the case of the distribution, include the graphs) with each component.

1. Mean
2. Median
3. Modal Interval
4. Range
5. IQR
6. Standard Deviation
7. Distribution of histogram and box plot
8. Slope of each linear model
9. Y-intercept of Coffee vs. Tea
10. Correlation coefficient for each linear model
11. Relevant interpolations or extrapolations
12. Correlation type (from Activity 5) for coffee and tea

Consider the following Data:

By using the definition and discussing what is relevant to the situation, interpret each of the following for both the coffee and tea data. Also, compare each for coffee and tea. Be sure to include the relevant information (state the value of or, in the case of the distribution, include the graphs) with each component.

1. Mean
2. Median
3. Modal Interval
4. Range
5. IQR
6. Standard Deviation
7. Distribution of histogram and box plot
8. Slope of each linear model
9. Y-intercept of Coffee vs. Tea
10. Correlation coefficient for each linear model
11. Relevant interpolations or extrapolations
12. Correlation type for coffee and tea

An article in the October 11, 2006, issue of the Washington Post claimed that 15% of high school students used cursive writing on the essay portion of the SAT exam in the academic year 2005-2006 (Pressler, 2006). Suppose you take a random sample from those exams and see what proportion of the sample used cursive writing for the essay. Assume the sample size is 180 do the following:

• A -- Determine what π and N are.
• B -- Describe the sampling distribution.
• C -- Show that the CLT holds.
• D -- What does the CLT say about the sampling distribution?
• E -- What is the probability of obtaining a sample where more than half of the students wrote their essay in cursive?
• F -- What is the probability of obtaining a sample where between 10 and 25% wrote their essay in cursive?
• G -- What is the probability of obtaining a sample where less than 12% of the students wrote their essay in cursive?

ABC Ltd. has revenue of N$500 million and sells all of its goods on credit to a variety of different wholesale customers. At the moment the company offers a standard credit period of 30 days. However, 70% of its customers (by revenue) take an average of 70 days to pay, while the other 30% of customers (by revenue) pay within 30 days. The company is considering offering a 2% discount for payment within 30 days and estimates that 80% of customers (by revenue) will take up this offer (including those that already pay within 30 days).

The Managing Director has asked the credit controller if the cost of this new policy would be worth offering. The company has a £80 million overdraft facility that it regularly uses to the full limit due to the lateness of payment and the cost of this overdraft facility is 15% per annum. The credit controller also estimates that bad debt level of 2% of revenue would be halved to 1% of revenue as a result of this new policy.

Required

1. Calculate the approximate equivalent annual percentage cost of a discount of 2%, which reduces the time taken by credit customers to pay from 70 days to 30 days.

2. Calculate the value of trade receivables under the existing scheme and the proposed scheme at the year-end.

3. Evaluate the benefits and costs of the scheme and explain with reasons whether the company should go ahead and offer the discount. You should also consider other factors in this decision. (Hint: You need to work out the cost of the discount compared to the interest on the overdraft saved and bad debt reduction.)

There are two important questions financial managers should ask:

• What level of assets are needed to operate?
• How to finance those assets or raise capital? (The firm can use equity or debt financing or combination of both.)

Select a publicly traded company (make sure your selected company is different than your classmates’) based in KSA and look (in terms of percentage) how it finances its operations using equity or debt financing.

In addition, in Saudi Arabia Vision 2030 stated SMEs (Small-Medium Size Enterprises) struggles to access adequate funding from the financial institutions. Offer two recommendations how this struggle is addressed and be in alignment with Saudi Vision 2030.