Question 1 (6pts)

Auto Clean, a full-service car wash company, is conducting a survey to address the following research objectives:

Objective 1. Assess the customer perceptions and evaluations of Auto Clean’s services.

Objective 2. Assess the effectiveness of Auto Clean’s promotional expenditures.

Objective 3. Identify demographic characteristics of Auto Clean’s customers.

Objective 4. Identify other relevant characteristics of Auto Clean’s customers.

This is the questionnaire they used for this research:

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To help us serve you better, please take a few minutes to fill out this short questionnaire. Thank you for your help.

1. How often do you usually have your car washed?

__ Less than once a month

__ Once a month

__ Two times a month

__ Three times a month

__ Four or more times a month

2. How often do you usually have your car waxed?

__ Less than once a month

__ Once a month

__ Two times a month

__ Three times a month

__ Four or more times a month

3. How often do you usually wash and/or wax your car by yourself?

__ Less than once a month

__ Once a month

__ Two times a month

__ Three times a month

__ Four or more times a month

4. How long has it been since you last brought your car to Auto Clean?

__ Less than a week

__ One to less than two weeks

__ Two to less than three weeks

__ Three to less than four weeks

__ Four weeks or more

5. How far from Auto Clean do you live?

__ Less than a km

__ One to less than three kms

__ Three to less than five kms

__ Five kms or more

6. In the past three months, have you used any car wash other than Auto Clean?

__ Yes                   __ No

7. How long are you willing to wait to have your car professionally washed/waxed? ________min
8. Indicate the extent to which you agree or disagree with the following statements about Auto Clean. For each statement, circle “1” if you strongly disagree and “7” if you strongly agree, or another appropriate number in between if your feeling are less strong.

9. What is your age? _______
10. What is your income? ___________$
11. What social network platforms do you use the most? ___________________________

Thank you very much!

Read the questionnaire above and answer the following questions:

1. Which questions in the questionnaire address each of Auto Clean’s research objectives (1 pts)? Indicate your answers in the table below.

2. Which question(s) in the questionnaire do(es) not address fully or do(es) in an appropriate way a specific research objective? For each of these questions, explain why and how you propose to solve this problem. (2 pts).

Indicate your answers in the table below.

3. Identify all other problems related to Auto Clean’s questionnaire’s design. Propose ways to solve each problem. For example, when the problem relates to a specific question wording, please propose a revised question. (3 pts).

Indicate your answers in the table below (add as many rows as necessary).

Case 17-9 Contradictory Evidence

Auditors have a responsibility to remain alert to audit evidence that contradicts other audit evidence obtained. The application of professional skepticism is essential to the critical assessment and questioning of contradictory audit evidence.

When the auditor obtains information during the course of the audit that contradicts information obtained from another source, the auditor has a responsibility to resolve the matter and consider its impact on the sufficiency and appropriateness of audit evidence obtained and the effect, if any, on other aspects of the audit.

The auditor may face significant challenges associated with identifying, evaluating, and addressing contrary, disconfirming, or inconsistent evidence. In particular, when auditing accounting estimates, auditors may have a tendency to overweight evidence that is supportive of management’s methods and assumptions, favoring evidence that confirms the aforementioned, without critically assessing the reasonableness of contradictory evidence or inputs.

The following three cases illustrate how the auditor considers audit evidence obtained, including contradictory evidence, related to accounting estimates.

Case A — Revenue Projections Used in an Impairment Assessment

An entity holds an indefinite-lived intangible asset that it tests annually for impairment under ASC 350 using an income approach (discounted cash flow analysis). As part of its assessment procedures, the engagement team identified the following risk of material misstatement related to the valuation assertion:

• The revenue projections (i.e., revenue growth rate) used in the discounted cash flow analysis could be unreasonable and result in the entity not recording an impairment that exists.

The risk of material misstatement was not identified as a fraud risk.

Note that the engagement team may have identified additional risks of material misstatement related to the valuation assertion as part of its risk assessment procedures; however, this case focuses on this specific risk of material misstatement for illustrative purposes.

The engagement team obtained the following evidence from the audit procedures performed to address this risk:

• The entity’s revenue projections align with historical trends.

• The entity’s revenue forecasts have not significantly varied from actual results over the past few years.

• The entity is operating in a depressed industry that has recently experienced market declines

• The entity has gained market share in each of the last three years.

• The revenue growth rates used in the projections are above the growth rates predicted by the industry analysts.

• The entity has a significant number of multi-year contracts with its customers.

Case B — Impairment Indicator Related to a Potential Asset Sale

An entity owns a long-lived asset group (the “Asset Group”) that management evaluated for impairment indicators in the current year in accordance with ASC 360 and concluded that there were no such indicators. As part of its risk assessment procedures, the engagement team identified the following risk of material misstatement related to the valuation assertion:

• The entity did not identify relevant impairment indicators related to ASC 360-10-35- 21(f), which states an impairment indicator may exist if there is “a current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.”

The risk of material misstatement was not identified as a fraud risk.

Note that the engagement team may have identified additional risks of material misstatement related to the valuation assertion identified as part of its risk assessment procedures; however, this example focuses on this specific risk of material misstatement for illustrative purposes.

The engagement team obtained the following evidence from the audit procedures performed to address this risk:

• The budget used by management for operational purposes is reasonable and indicates operating income and positive cash flows for the Asset Group.

• Because they are in a distressed industry, the entity and the Asset Group have experienced declines in financial results in recent years.

• Management communicated to investors an intention to shift its operating strategy to improve cash flows and is exploring options and opportunities to achieve this goal.

• Board meeting minutes indicate that a number of strategic options and opportunities have been discussed, including the potential sale of the Asset Group, the potential sale of other assets, and refinancing debt.

• The entity projects that it will meet its financing and liquidity needs without having to sell the Asset Group or any other assets.

• Management represented to the engagement team that it does not believe it is more likely than not that the Asset Group will be sold in the near future.

Case C — Assumptions Used to Estimate the Allowance for Doubtful Accounts

A commercial furniture wholesaler reserves for its allowance for doubtful accounts based on standard reserve percentages supported by historical collection experience. (Note that this example does not contemplate the need for specific reserves.) Management uses the same process for estimating the allowance for doubtful accounts (the “reserve”), as it did in the prior year. As part of its risk assessment procedures, the engagement team identified the following risk of material misstatement related to the valuation assertion:

• The entity may not appropriately update its reserve policy (including updates to reserve percentages) for changes in circumstances.

Note that the engagement team may have identified additional risks of material misstatement related to the valuation assertion identified as part of its risk assessment procedures; however, this example focuses on this specific risk of material misstatement for illustrative purposes. In addition, this risk was not identified as a fraud risk.

The engagement team obtained the following evidence from the audit procedures performed to address this risk:

• The current-year reserve as a percentage of gross receivables is consistent with prior years, although there was an increase in revenues, gross receivables, and the related reserve.

• Bad debt expense has remained consistent as a percentage of gross revenue over the past several years.

• Retrospective review of receivable collections indicates that management’s reserves have historically been accurate.

• Economic conditions have been fairly stable and are predicted to remain stable.

• Revenues increased substantially year over year as a result of the introduction of a new product line.

• The new product line is marketed toward customers in the restaurant industry, in which the entity does not currently have an established customer base.

• The restaurant industry generally has a higher rate of business failure than other customer segments.

• The entity’s collections experience has primarily been with customers in the retail and professional services industries; the entity has very little collections experience with the new product line, given the recent launch.

• Approved sales terms have not changed year to year (e.g., sales personnel may offer an extension of credit of up to 100 percent of the purchase price consistent with prior year, creditworthiness is determined in the same manner, payment terms are consistent with prior year).

• Sales of the new product line are more frequently 100 percent financed versus sales of the existing product lines, resulting in an increase in gross receivables.

• Competitors who manufacture similar restaurant furniture products have higher reserves as a percentage of their trade receivables.

Required:

For each case above:

1. Identify and summarize the corroborative and contradictory audit evidence in each scenario.

2. Determine what additional information, if any, is needed to reach a conclusion regarding management’s assertion.

3. On the basis of the case facts, determine whether management’s assertion is supportable and how additional information obtained might change your conclusion.

Case 17-9 Contradictory Evidence

Auditors have a responsibility to remain alert to audit evidence that contradicts other audit evidence obtained. The application of professional skepticism is essential to the critical assessment and questioning of contradictory audit evidence.

When the auditor obtains information during the course of the audit that contradicts information obtained from another source, the auditor has a responsibility to resolve the matter and consider its impact on the sufficiency and appropriateness of audit evidence obtained and the effect, if any, on other aspects of the audit.

The auditor may face significant challenges associated with identifying, evaluating, and addressing contrary, disconfirming, or inconsistent evidence. In particular, when auditing accounting estimates, auditors may have a tendency to overweight evidence that is supportive of management’s methods and assumptions, favoring evidence that confirms the aforementioned, without critically assessing the reasonableness of contradictory evidence or inputs.

The following three cases illustrate how the auditor considers audit evidence obtained, including contradictory evidence, related to accounting estimates.

Case A — Revenue Projections Used in an Impairment Assessment

An entity holds an indefinite-lived intangible asset that it tests annually for impairment under ASC 350 using an income approach (discounted cash flow analysis). As part of its risk assessment procedures, the engagement team identified the following risk of material misstatement related to the valuation assertion:

• The revenue projections (i.e., revenue growth rate) used in the discounted cash flow analysis could be unreasonable and result in the entity not recording an impairment that exists.

The risk of material misstatement was not identified as a fraud risk.

Note that the engagement team may have identified additional risks of material misstatement related to the valuation assertion as part of its risk assessment procedures; however, this case focuses on this specific risk of material misstatement for illustrative purposes.

The engagement team obtained the following evidence from the audit procedures performed to address this risk:

• The entity’s revenue projections align with historical trends.

• The entity’s revenue forecasts have not significantly varied from actual results over the

  past 3 years.

• The entity is operating in a depressed industry that has recently experienced market

  declines.

• The entity has gained market share in each of the last three years.

• The revenue growth rates used in the projections are above the growth rates predicted by

  the industry analysts.

• The entity has a significant number of multi-year contracts with its customers.

  Case B — Impairment Indicator Related to a Potential Asset Sale

  An entity owns a long-lived asset group (the “Asset Group”) that management evaluated for impairment indicators in the current year in accordance with ASC 360 and concluded that there were no such indicators. As part of its risk assessment procedures, the engagement team identified the following risk of material misstatement related to the valuation assertion:

• The entity does not identify relevant impairment indicators related to ASC 360-10-35- 21(f), which states an impairment indicator may exist if there is “a current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.”

The risk of material misstatement was not identified as a fraud risk.

Note that the engagement team may have identified additional risks of material misstatement related to the valuation assertion identified as part of its risk assessment procedures; however, this example focuses on this specific risk of material misstatement for illustrative purposes.

The engagement team obtained the following evidence from the audit procedures performed to address this risk:

• The budget used by management for operational purposes is reasonable and indicates operating income and positive cash flows for the Asset Group.

• Because they are in a distressed industry, the entity and the Asset Group have experienced declines in financial results in recent years.

• Management communicated to investors an intention to shift its operating strategy to improve cash flows and is exploring options and opportunities to achieve this goal.

• Board meeting minutes indicate that a number of strategic options and opportunities have been discussed, including the potential sale of the Asset Group, the potential sale of other assets, and refinancing debt.

• The entity projects that it will meet its financing and liquidity needs without having to sell the Asset Group or any other assets.

• Management represented to the engagement team that it does not believe it is more likely than not that the Asset Group will be sold in the near future.

Case C — Assumptions Used to Estimate the Allowance for Doubtful Accounts

A commercial furniture wholesaler reserves for its allowance for doubtful accounts based on standard reserve percentages supported by historical collection experience. (Note that this example does not contemplate the need for specific reserves.) Management uses the same process for estimating the allowance for doubtful accounts (the “reserve”), as it did in the prior year. As part of its risk assessment procedures, the engagement team identified the following risk of material misstatement related to the valuation assertion:

• The entity may not appropriately update its reserve policy (including updates to reserve percentages) for changes in circumstances.

Note that the engagement team may have identified additional risks of material misstatement related to the valuation assertion identified as part of its risk assessment procedures; however, this example focuses on this specific risk of material misstatement for illustrative purposes. In addition, this risk was not identified as a fraud risk.

The engagement team obtained the following evidence from the audit procedures performed to address this risk:

• The current-year reserve as a percentage of gross receivables is consistent with prior years, although there was an increase in revenues, gross receivables, and the related reserve.

• Bad debt expense has remained consistent as a percentage of gross revenue over the past several years.

• Retrospective review of receivable collections indicates that management’s reserves have historically been accurate.

• Economic conditions have been fairly stable and are predicted to remain stable.

• Revenues increased substantially year over year as a result of the introduction of a new

  product line.

• The new product line is marketed toward customers in the restaurant industry, in which

  the entity does not currently have an established customer base.

• The restaurant industry generally has a higher rate of business failure than other customer

  segments.

• The entity’s collections experience has primarily been with customers in the retail and

  professional services industries; the entity has very little collections experience with the

  new product line, given the recent launch.

• Approved sales terms have not changed year to year (e.g., sales personnel may offer an

  extension of credit of up to 100 percent of the purchase price consistent with prior year, creditworthiness is determined in the same manner, payment terms are consistent with prior year).

• Sales of the new product line are more frequently 100 percent financed versus sales of the existing product lines, resulting in an increase in gross receivables.

• Competitors who manufacture similar restaurant furniture products have higher reserves as a percentage of their trade receivables.

Required:

For each case above:

1. Identify and summarize the corroborative and contradictory audit evidence in each scenario.

2. Determine what additional information, if any, is needed to reach a conclusion regarding management’s assertion.

3. On the basis of the case facts, determine whether management’s assertion is supportable and how additional information obtained might change your conclusion.

CHAPTER 5

FATABÚÐ Distributing Company completed these merchandising transactions in the month of April. At the beginning of April, the ledger of FATABÚÐ showed Cash of $10,000 and Common Stock of $10,000.

Apr. 2 Purchased merchandise on account from Drekka Co. $8,700, terms 2/10, n/30.
Apr. 4 Sold merchandise on account to Gata, Inc. $6,000, terms 2/10, n/30, FOB Destination. The cost of the merchandise sold was $3,700.

Apr. 5 Paid $200 freight by check on April 4 sale.
Apr. 6 Received credit from Drekka Co. for merchandise returned $400.
Apr. 11 Paid Drekka Co. in full, less discount.
Apr. 13 Received collections in full, less discounts, from Gata, Inc., billed on
April 4.
Apr. 14 Purchased merchandise from Flug, Inc. for cash $4,700. No shipping costs incurred.
Apr. 16 Received refund of $500 from Flug, Inc. for returned merchandise on cash purchase of April 14.
Apr. 18 Purchased merchandise from Sigga Distributors $5,500, terms 2/10, n/30, FOB Shipping Point.
Apr. 20 Paid freight by check on April 18 purchase $180.
Apr. 23 Sold merchandise for cash to Kirkja, Inc. for $8,300. The cost of the merchandise sold was $5,580.
Apr. 26 Purchased merchandise for cash from Silung, Inc. for $2,300.
Apr. 27 Paid Sigga Distributors in full, less discount.
Apr. 29 Made refunds to various cash customers for returned merchandise $180. The returned merchandise had a cost of $120.
Apr. 30 Sold merchandise on account to Frimirki, Inc. $3,980, terms n/30. The cost of the merchandise sold was $2,500. No shipping charges.

FATABÚÐ Distributing Company’s chart of accounts includes:

Cash, Accounts Receivable, Inventory, Accounts Payable, Common Stock, Sales Revenue, Sales Returns and Allowances, Sales Discounts, Cost of Goods Sold, and Freight-Out.

Instructions (a) Journalize the transactions. (b) Prepare the income statement through gross profit for the month of April 2014.

TIP: Since you need to prepare an income statement through gross profit, you should keep track of your accounts as you go along.

The mean wait time at Social Security Offices is 25 minutes with a standard deviation of 11 minutes. Use this information to answer the following questions:

A.            If you randomly select 40 people what is the probability that their average wait time will be more than 27 minutes?

B.            If you randomly select 75 people what is the probability that their average wait time will be between 23 and 26 minutes?

C.            If you randomly select 100 people what is the probability that their average wait time will be at most 24 minutes?

2.            The proportion of people who wait more than an hour at the Social Security Office is 28%. Use this information to answer the following questions:

A.            If you randomly select 45 people what is the probability that at least 34% of them will wait more than an hour?

B.            If you randomly select 60 people what is the probability that between 25% and 30% of them will wait more than an hour?

C.            If you randomly select 150 people what is the probability that less than 23% of them will wait more than an hour?

1.            The mean wait time at Social Security Offices is 25 minutes with a standard deviation of 11 minutes. Use this information to answer the following questions:

A.            If you randomly select 40 people what is the probability that their average wait time will be more than 27 minutes?

B.            If you randomly select 75 people what is the probability that their average wait time will be between 23 and 26 minutes?

C.            If you randomly select 100 people what is the probability that their average wait time will be at most 24 minutes?

2.            The proportion of people who wait more than an hour at the Social Security Office is 28%. Use this information to answer the following questions:

A.            If you randomly select 45 people what is the probability that at least 34% of them will wait more than an hour?

B.            If you randomly select 60 people what is the probability that between 25% and 30% of them will wait more than an

hour?

C.            If you randomly select 150 people what is the probability that less than 23% of them will wait more than an hour?

A. As a health policy expert, you are interested in knowing whether men and women in the United States differ in the frequency they visit doctors when sick. So you conduct a survey of 134 people and ask them how often they visit a doctor when they are sick.  The results from this sample are as follows:

Perform the appropriate hypothesis test, at alpha = .01, to determine whether there is a relationship between sex and the frequency with which individuals in the United States visit doctors.  You must show your hand calculations for this problem. Describe your hypotheses, results, and conclusion in a brief paragraph.  If it is appropriate, you should also discuss the strength of the relationship based upon a suitable measure.

B . Show in a table or explain in words what the crosstabulation for your two variables from

Question above would look like if there were absolutely no association between the independent variable and the dependent variable.

2.The following table contains data on the joint distribution of age(Age​)and average hourly earnings​(AHE​)for 25 to 34​ year-old full-time workers with an educational level that exceeds a high school diploma in 2012. Download the data from the table by clicking the download table icon.A detailed description of the variables used in the dataset is available here

. Use a statistical package of your choice to answer the following questions.

Compute the marginal distribution of

Age.

A.Compute the mean of AHE for Age​ = 31​; that​ is, compute, E( (AHE Age=31)=.

B. Use the law of iterated expectations to compute the mean of AHE​; that is compute E(AHE)

c. Compute the variance of AHE​; that is compute   var(AHE​).

D. Compute the covariance between AHE and Age​; that is compute cov (AHE​, Age​)

F. Compute the correlation between AHE and Age​; that is compute corr(AHE​, Age​)

Jack and Jill are friends that form a company called Gingerbread Corp. Mike, Jill's brother wants to participate in the business venture and provides $133,000 in services.

Jack will contribute the following assets to Gingerbread: Total Tax Basis: 1,625,000 and FMV: 2,375,000

Jill will contribute the following assets to Gingerbread: Total Tax Basis: 230,000 and FMV: 1,680,000

Mike will contribute the following assets to Gingerbread: Total Tax Basis: 630,000 and FMV: 240,000

Gingerbread will issue stock as follows:

16800 shares of common stock, 100 par value, issued to Jack

16800 shares of common stock, 100 par value, issued to Jill

3730 shares of common stock , 100 par value, issued to Mike

Because Jack has contributed assets to Gingerbread with a fair market value of $2,375,000 in exchange for stock with a fair market value of $1,680,000, he will receive cash from Gingerbread of $695,000 upon its formation.

Jill also borrows a $400,000 loan to cover costs.

Based on the fact patterns, answer the short questions below:

a How much gain (loss) will Mike realize on the contribution of the assets and services to Gingerbread?

b. How much gain (loss) will Mike recognize on the contribution of the assets and services to Gingerbread? [hint: you should consider how services will be treated for tax purposes]

c. What will be Mike's basis in the 3,730 shares of Gingerbread common stock he receives?

d. How much gain (loss) will Gingerbread recognize on Jack’s contribution of assets to Gingerbread?

e. How much gain (loss) will Gingerbread recognize on Jill’s contribution of assets to Gingerbread?

f. How much gain (loss) will Gingerbread recognize on Mike’s contribution of assets and services to Gingerbread? [hint: you should consider how services will be treated for tax purposes]

Identify 5 competencies that hit home for you in a particular way this session. Explain your rationale for picking specific competencies. Explain how these 5 competencies relate to nursing and how they will help you in your career. The five competencies chosen are:

1. Cooperative learning: Student interactions in purposefully structured groups that encourage individual flexibility and group learning through positive interdependence, individual accountability, face-to-face interaction, appropriate use of collaborative skills, and regular self-assessment of team functioning (Massachusetts Nurse of the Future Competencies, 2016).

2. Domains of learning: Cognitive domain of learning skills revolves around knowledge, comprehension, and thinking through a particular topic. Affective domain of learning skills describes the way people react emotionally in terms of attitudes and feelings. Psychomotor domain of learning skills describes the ability to physically perform a task or behavior. (Bloom, 1956)

3. Hand-off: Transfer of verbal and/or written communication about patient condition between care providers (QSEN, 2007).

4. Patient safety: Freedom from accidental or preventable injuries produced by medical care (Massachusetts Coalition for the Prevention of Medical Errors, 2006).

5. Safety culture: Commitment to safety that permeates all levels of health care delivery (Agency for Health care Research and Quality, n.d.).