Problem 20-17 Integrating problem; error; depreciation; deferred taxes [LO20-6]

George Young Industries (GYI) acquired industrial robots at the beginning of 2015 and added them to the company’s assembly process. During 2018, management became aware that the $2.2 million cost of the machinery was inadvertently recorded as repair expense on GYI’s books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows:

The tax rate is 40% for all years involved.

Required:
1. & 3. Prepare any journal entry necessary as a direct result of the error described and the adjusting entry for 2018 depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

Are medical students more motivated than law students? A randomly selected group of each were administered a survey of attitudes toward Life, which measures motivation for upward mobility. The scores are summarized below. The researchers suggest that there are occupational differences in mean testosterone level. Medical doctors and university professors are two of the occupational groups for which means and standard deviations are recorded and listed in the following table.

Let us denote:

• μ1:μ1: population mean testosterone among medical doctors,
• μ2:μ2: population mean testosterone among university professors,
• σ1:σ1: population standard deviation of testosterone among medical doctors,
• σ2:σ2: population standard deviation of testosterone among university professors.

If the researcher is interested to know whether the mean testosterone level among medical doctors is higher than that among university professors, what are the appropriate hypotheses he should test?
H0:x¯1=x¯2H0:x¯1=x¯2 against Ha:x¯1<x¯2Ha:x¯1<x¯2 .
H0:μ1=μ2H0:μ1=μ2 against Ha:μ1≠μ2Ha:μ1≠μ2 .
H0:x¯1=x¯2H0:x¯1=x¯2 against Ha:x¯1>x¯2Ha:x¯1>x¯2 .
H0:μ1=μ2H0:μ1=μ2 against Ha:μ1<μ2Ha:μ1<μ2 .
H0:x¯1=x¯2H0:x¯1=x¯2 against Ha:x¯1≠x¯2Ha:x¯1≠x¯2 .
H0:μ1=μ2H0:μ1=μ2 against Ha:μ1>μ2Ha:μ1>μ2 .

Case 1: Assume that the population standard deviations are unequal, i.e. σ1≠σ2σ1≠σ2 .
What is the standard error of the difference in sample mean x¯1−x¯2x¯1−x¯2 ? i.e. s.e.(x¯1−x¯2)=s.e.(x¯1−x¯2)= [answer to 4 decimal places]

Rejection region: We reject H0H0 at 5% level of significance if:
|t|>2.13|t|>2.13 .
t>1.75t>1.75 .
t<−1.75t<−1.75 .
t<−2.13t<−2.13 .
t>2.13t>2.13 .
None of the above.

The value of the test-statistic is: Answer to 3 decimal places.

If α=0.05α=0.05 , and the p-value is 0.2820, what will be your conclusion?
There is not enough information to conclude.
Reject H0H0 .
Do not reject H0H0 .

Case 2: Now assume that the population standard deviations are equal, i.e. σ1=σ2σ1=σ2 .
Compute the pooled standard deviation, 8pooled [answer to 4 decimal places]

Rejection region: We reject H0H0 at 5% level of significance if:
t<−1.73t<−1.73 .
t<−2.10t<−2.10 .
t>1.73t>1.73 .
t>2.10t>2.10 .
|t|>2.10|t|>2.10 .
None of the above.

The value of the test-statistic is: Answer to 3 decimal places.

If α=0.05α=0.05 , , and the p-value is 0.3095, what will be your conclusion?
Reject H0H0 .
Do not reject H0H0 .
There is not enough information to conclude.

PART 1:

When bonding teeth, orthodontists must maintain a dry field. A new bonding adhesive has been developed to eliminate the necessity of a dry field. However, there is a concern that the new bonding adhesive is not as strong as the current standard, a composite adhesive. Tests on a sample of 26 extracted teeth bonded with the new adhesive resulted in a mean breaking strength (after 24 hours) of 2.33 MPa, and a standard deviation of 4 MPa. Orthodontists want to know if the true mean breaking strength is less than 4.06 MPa, the mean breaking strength of the composite adhesive. Assume normal distribution for breaking strength of the new adhesive.

1. The p-value of the test is (answer to 4 decimal places):

PART 2:

Are medical students more motivated than law students? A randomly selected group of each were administered a survey of attitudes toward Life, which measures motivation for upward mobility. The scores are summarized below. The researchers suggest that there are occupational differences in mean testosterone level. Medical doctors and university professors are two of the occupational groups for which means and standard deviations are recorded and listed in the following table.

Let us denote:

• μ₁: population mean testosterone among medical doctors,
• μ₂: population mean testosterone among university professors,
• σ₁: population standard deviation of testosterone among medical doctors,
• σ₂: population standard deviation of testosterone among university professors.

1. If the researcher is interested to know whether the mean testosterone level among medical doctors is higher than that among university professors, what are the appropriate hypotheses he should test?
H₀: μ₁ = μ₂   against   H_a: μ₁ < μ₂.
H₀: μ₁ = μ₂   against   H_a: μ₁ > μ₂.
H₀: [(x)]₁ = [(x)]₂   against   H_a: [(x)]₁ ≠ [(x)]₂.
H₀: [(x)]₁ = [(x)]₂   against   H_a: [(x)]₁ > [(x)]₂.
H₀: [(x)]₁ = [(x)]₂   against   H_a: [(x)]₁ < [(x)]₂.
H₀: μ₁ = μ₂   against   H_a: μ₁ ≠ μ₂.

Case 1: Assume that the population standard deviations are unequal, i.e. σ₁ ≠ σ₂.
1. What is the standard error of the difference in sample mean [(x)]₁ − [(x)]₂? i.e. s.e.([(x)]₁−[(x)]₂) = [answer to 4 decimal places]

2. Rejection region: We reject H₀ at 10% level of significance if:
t < −1.89.
t > 1.41.
t < −1.41.
|t| > 1.89.
t > 1.89.
None of the above.

3. The value of the test-statistic is: Answer to 3 decimal places.

Case 2: Now assume that the population standard deviations are equal, i.e. σ₁ = σ₂.
1. Compute the pooled standard deviation, s_pooled [answer to 4 decimal places]

2. Rejection region: We reject H₀ at 10% level of significance if:
t > 1.78.
t < −1.36.
t > 1.36.
|t| > 1.78.
t < −1.78.
None of the above.

3. The value of the test-statistic is: Answer to 3 decimal places.

The researchers suggest that there are occupational differences in mean testosterone level. Medical doctors and university professors are two of the occupational groups for which means and standard deviations are recorded and listed in the following table.

Let us denote:

• μ1:μ1: population mean testosterone among medical doctors,
• μ2:μ2: population mean testosterone among university professors,
• σ1:σ1: population standard deviation of testosterone among medical doctors,
• σ2:σ2: population standard deviation of testosterone among university professors.

Case 1: Assume that the population standard deviations are unequal, i.e. σ1≠σ2σ1≠σ2.
What is the standard error of the difference in sample mean x¯1−x¯2x¯1−x¯2? i.e. s.e.(x¯1−x¯2)=s.e.(x¯1−x¯2)= [answer to 4 decimal places]

Which of the following options gives the formula for 95% confidence interval for μ1−μ2μ1−μ2?
−0.39∓1.86×s.e.(x¯1−x¯2)−0.39∓1.86×s.e.(x¯1−x¯2)
−0.39∓3.36×s.e.(x¯1−x¯2)−0.39∓3.36×s.e.(x¯1−x¯2)
−0.39∓2.9×s.e.(x¯1−x¯2)−0.39∓2.9×s.e.(x¯1−x¯2)
−0.39∓2.31×s.e.(x¯1−x¯2)−0.39∓2.31×s.e.(x¯1−x¯2)
−0.39∓1.4×s.e.(x¯1−x¯2)−0.39∓1.4×s.e.(x¯1−x¯2)

Are there significant difference between mean testosterone levels of medical doctors and university professors?
no, because x¯1=x¯2x¯1=x¯2
yes, because x¯1≠x¯2x¯1≠x¯2
yes, because the entire 95% confidence interval for μ1−μ2μ1−μ2 does not contain 0
no, because the 95% confidence interval for μ1−μ2μ1−μ2 contains 0

Case 2: Now assume that the population standard deviations are equal, i.e. σ1=σ2σ1=σ2.
Compute the pooled standard deviation, spooledspooled [answer to 4 decimal places]

Which of the following options gives the formula for 95% confidence interval for μ1−μ2μ1−μ2 for pooled situation?
−0.39∓1.38×1.8922−0.39∓1.38×1.8922
−0.39∓3.25×1.8922−0.39∓3.25×1.8922
−0.39∓2.26×1.8922−0.39∓2.26×1.8922
−0.39∓1.83×1.8922−0.39∓1.83×1.8922
−0.39∓2.82×1.8922−0.39∓2.82×1.8922

What is the margin of error of the 95% pooled confidence interval of μ1−μ2μ1−μ2? [answer to 4 decimal places]

The stockholders’ equity accounts of Carla Company have the following balances on December 31, 2020. Common stock, $10 par, 326,000 shares issued and outstanding $3,260,000 Paid-in capital in excess of par—common stock 1,110,000 Retained earnings 5,930,000 Shares of Carla Company stock are currently selling on the Midwest Stock Exchange at $36.

Prepare the appropriate journal entries for each of the following cases. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(a) A stock dividend of 6% is (1) declared and (2) issued. (b) A stock dividend of 100% is (1) declared and (2) issued. (c) A 2-for-1 stock split is (1) declared and (2) issued.

Whispering Company had bonds outstanding with a maturity value of $279,000. On April 30, 2020, when these bonds had an unamortized discount of $10,000, they were called in at 106. To pay for these bonds, Whispering had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 102 (face value $279,000).

Ignoring interest, compute the gain or loss.

Ignoring interest, record this refunding transaction. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Sheridan Company is issuing $9.8 million 12% bonds in a private placement on July 1, 2020. Each $1200 bond pays interest semi-annually on December 31 and June 30 of each year. The bonds mature in ten years. At the time of issuance, the market interest rate for similar types of bonds was 8%. What is the expected selling price of the bonds?

A) $14700000 B) $12463736 C) $12430317 D) $12530374

The ledger of Hammond Company, on March 31, 2020, includes these selected accounts before adjusting entries are prepared.

  Debit   Credit

Prepaid Insurance   RM 3,600

Supplies   2,800

Equipment   25,000

Accumulated Depreciation—Equipment   RM5,000

Unearned Service Revenue   9,200

An analysis of the accounts shows the following.

1.Insurance expires at the rate of RM100 per month.

2.Supplies on hand total RM800.

3.The equipment depreciates RM200 a month.

4.During March, services were performed for one-half of the unearned service revenue.

Prepare the adjusting entries for the month of March.

The company has the following account balances on June 1, 2020. (all accounts have their ‘normal’ balances)

Drawings: 1000

Cash: 20000

Service revenue: 50000

Capital: 15000

Depreciation Expense: 700

Equipment: 30000

Accounts Payable: 5000

Insurance Expense: 500

Unearned Service Revenue: 4000

Prepaid Service Revenue: 500

Accounts Receivable: 4000

Rent Expense: 5000

Salaries Expense: 16000

Accumulated Depreciation - Equipment: 3000

During June 2018, the following events took place. Where appropriate, record a journal entry for each transaction. If no journal entry is required, write ‘no entry’.

1. On June 2, the company prepaid rent for July to September for $6,000.

2. On June 8, someone invested $3,000 cash and a computer system valued at $2,000 into the company.

3. On June 10, the company collected $4,000 it was owed on account.

4. On June 15, The company provided a quotation for membership fees to a corporation looking to provide fitness benefits to its employees. The quotation was for $10,000. The corporation will decide next month if it is a good fit.

5. On June 22 the company provided product and collected $5,000.

6. On June 24 the company received a $1,000 bill for advertising expense that it will pay in the near future.

7. On June 27 the company paid $2,000 cash on account.

8. On June 29, the owner withdrew $600 for personal use.

1. On June 30, the company purchased $1,000 of supplies on account.

10. On June 30, the company paid employee salaries of $3,000.

Explanation is needed if the item needs to to be calculated.