1) A demographer wants to measure life expectancy in countries 1 and 2. Let μ1 and μ2 denote the mean life expectancy in countries 1 and 2, respectively. Specify the hypothesis to determine if life expectancy in country 1 is more than 10 years lower than in country 2.

A) H0:μ1– μ2≤10, HA:μ1– μ2>10

B) H0:μ1– μ2≥10, HA: μ1– μ2<10

C)H0:μ1– μ2≤–10, HA:μ1– μ2>−10

D)H0:μ1– μ2≥–10, HA:μ1– μ2<−10

2) A restaurant chain has two locations in a medium-sized town and, believing that it has oversaturated the market for its food, is considering closing one of the restaurants. The manager of the restaurant with a downtown location claims that his restaurant generates more revenue than the sister restaurant by the freeway. The CEO of this company, wishing to test this claim, randomly selects 36 monthly revenue totals for each restaurant. The revenue data from the downtown restaurant have a mean of $360,000 and a standard deviation of $50,000, while the data from the restaurant by the freeway have a mean of $340,000 and a standard deviation of $40,000. Assume there is no reason to believe the population standard deviations are equal, and let μ1 and μ2 denote the mean monthly revenue of the downtown restaurant and the restaurant by the freeway, respectively. Which of the following hypotheses should be used to test the manager's claim?

A) H0:μ1– μ2≤0, HA:μ1– μ2>0

B) H0:μ1– μ2 ≥0 , HA:μ1– μ2<0

C) H0:μ1– μ2=0, HA:μ1– μ2≠0

D) H0:μ1– μ2>0, HA:μ1– μ2≤0

3) what the formula for the sample variance s2 when used as an estimate of σ2 for a random sample of n observations from a population?

4)What is the formula for the sample variance s2 when used as an estimate of σ2 for a random sample of n observations from a population? 46)  A financial analyst examines the performance of two mutual funds and claims that the variances of the annual returns for the bond funds differ. To support his claim, he collects dataon the annual returns (in percent) for the years 2001 through 2010. The analyst assumes that the annual returns for the two emerging market bond funds are normally distributed. Use the following summary statistics.

For the competing hypotheses Η0: σ1^2/ σ2^2=1, ΗA:σ1^2/ σ2^2≠ 1, which of the following is the correct approximation of the p-value?

A) Less than 0.01

B) Between 0.01 and 0.025

C) Between 0.02 and 0.05

D) Between 0.05 and 0.1

5) ) The following table shows the distribution of employees in an organization. Martha Foreman,an analyst, wants to see if race has a bearing on the position a person holds with this company

Using the p-value approach and α= 0.05, the decision and conclusion are ________.

A) reject the null hypothesis; conclude race and seniority are dependent

B) reject the null hypothesis; conclude race and seniority are independent

C) do not reject the null hypothesis; cannot conclude race and seniority are dependent

D) do not reject the null hypothesis; conclude race and seniority are independent

Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale.

During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $22 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows:

Also during 2018, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $840,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2018 and paid for in full for $840,000 each by the buyers. The completed homes cost $630,000 each to construct. The construction costs incurred during 2018 for the nine uncompleted homes totaled $3,780,000.

Required:

1. Which method is most equivalent to recognizing revenue at the point of delivery?
2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts:
2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?
2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?
2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)
3. Answer the following questions assuming that Citation uses the percentage-of-completion method for its office building contracts.
3-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?
3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?
3-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)
4. Assume the same information for 2018 and 2019, but that as of year-end 2019 the estimated cost to complete the office building is $9,900,000. Citation uses the percentage-of-completion method for its office building contracts.
4-a. How much revenue related to this contract will Citation report in the 2019 income statement?
4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2019?
4-c. What will Citation report in its 2019 balance sheet related to this contract? (Ignore cash.)
5. Which method of accounting should Citation Builders, Inc adopt for its single-family houses?
6. What will Citation report in its 2018 income statement and 2018 balance sheet related to the single-family home business (ignore cash in the balance sheet)?

Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale.

During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $13 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows:

Also during 2018, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $680,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2018 and paid for in full for $680,000 each by the buyers. The completed homes cost $510,000 each to construct. The construction costs incurred during 2018 for the nine uncompleted homes totaled $3,060,000.

Required:

1. Which method is most equivalent to recognizing revenue at the point of delivery?
2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts:
2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?
2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?
2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)
3. Answer the following questions assuming that Citation uses the percentage-of-completion method for its office building contracts.
3-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?
3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?
3-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)
4. Assume the same information for 2018 and 2019, but that as of year-end 2019 the estimated cost to complete the office building is $5,850,000. Citation uses the percentage-of-completion method for its office building contracts.
4-a. How much revenue related to this contract will Citation report in the 2019 income statement?
4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2019?
4-c. What will Citation report in its 2019 balance sheet related to this contract? (Ignore cash.)
5. Which method of accounting should Citation Builders, Inc adopt for its single-family houses?
6. What will Citation report in its 2018 income statement and 2018 balance sheet related to the single-family home business (ignore cash in the balance sheet)?

The comparative balance sheets for 2018 and 2017 and the income statement for 2018 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.

Additional information from the accounting records:

Investment revenue includes Arduous Company’s $10 million share of the net income of Demur Company, an equity method investee.

Treasury bills were sold during 2018 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.

A machine originally costing $78 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $13 million.

Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $7 million.

The preferred stock of Tory Corporation was purchased for $29 million as a long-term investment.

Land costing $50 million was acquired by issuing $25 million cash and a 10%, four-year, $25 million note payable to the seller.

The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $86 million. Annual lease payments of $6 million are paid at the beginning of each year starting January 1, 2018.

$64 million of bonds were retired at maturity.

In February, Arduous issued a stock dividend (5.6 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.

In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $13 million.

Required:
Prepare the statement of cash flows for Arduous Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Do not round your intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.).)

Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale. During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $13 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: 2018 2019 2020 Costs incurred during the year $ 2,600,000 $ 6,175,000 $ 2,925,000 Estimated costs to complete as of year-end 7,800,000 2,925,000 — Billings during the year 1,300,000 6,500,000 5,200,000 Cash collections during the year 1,170,000 5,030,000 6,800,000 Also during 2018, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $680,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2018 and paid for in full for $680,000 each by the buyers. The completed homes cost $510,000 each to construct. The construction costs incurred during 2018 for the nine uncompleted homes totaled $3,060,000. Required: 1. Which method is most equivalent to recognizing revenue at the point of delivery? 2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts: 2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements? 2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.) 3. Answer the following questions assuming that Citation uses the percentage-of-completion method for its office building contracts. 3-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements? 3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 3-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.) 4. Assume the same information for 2018 and 2019, but that as of year-end 2019 the estimated cost to complete the office building is $5,850,000. Citation uses the percentage-of-completion method for its office building contracts. 4-a. How much revenue related to this contract will Citation report in the 2019 income statement? 4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2019? 4-c. What will Citation report in its 2019 balance sheet related to this contract? (Ignore cash.) 5. Which method of accounting should Citation Builders, Inc adopt for its single-family houses? 6. What will Citation report in its 2018 income statement and 2018 balance sheet related to the single-family home business (ignore cash in the balance sheet)?

Nailed It! Construction (Nailed It! or the “Company”), an SEC registrant, is a construction company that manufactures commercial and residential buildings. On March 1, 20X1, the Company entered into an agreement with a customer, Village Apartments, to construct a residential apartment building for a fixed price of $1.5 million. The Company estimates that it will incur costs of $1 million to complete construction of the apartment building. The apartment building will only transfer to Village Apartments once the construction of the entire building is complete. In addition, Village Apartments has various design requirements that would require Nailed It! to incur significant costs to rework the building prior to selling it to a customer other than Village Apartments. To construct the apartment building, Nailed It! acquires standard materials that it regularly uses in construction contracts for both residential and commercial buildings. These materials are used to manufacture generic component parts for inclusion in Village Apartments’ residential buildings. These standard materials remain interchangeable with other items until they are deployed in a Village Apartments building. The Company has made the following purchases and incurred the following costs throughout the construction progress:

•As of June 30, 20X1, in total, Nailed It! has purchased $75,000 of component parts. As of June 30, 20X1, $25,000 of component parts remain in inventory and $50,000 have been integrated into the project. Further, Nailed It! has incurred $12,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended June 30, 20X1.

•During the three months ended September 30, 20X1, Nailed It! purchased an additional $500,000 of component parts ($575,000 in total). Of the $575,000 of component parts, $325,000 remain in inventory and $200,000 have been integrated into the project during the three months ended September 30, 20X1. During the three months ended September 30, 20X1, Nailed It! incurred an additional $50,000 of direct costs to integrate the component parts into the Village Apartments construction project.

•As of September 30, 20X1, Nailed It! determined that the project was over budget and revised its cost estimate from $1 million to $1.25 million.

•As of December 31 20X1, the construction project was completed. During the three months ended December 31, 20X1, Nailed It! purchased an additional $425,000 of generic component parts ($1 million in total). Of the $1 million component parts, $0 remain in inventory and $750,000 were integrated into the project during the three months ended December 31, 20X1. Nailed It! has incurred $187,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended December 31,

If Village Apartments cancels the contract, Nailed It! will be entitled to reimbursement for costs incurred for work completed to date plus a margin of 20 percent, which is considered to be a reasonable margin. Nailed It! will not be reimbursed for any materials that have been purchased for use in the contract but have not yet been used and are still controlled by Nailed It!.

Required: 1.Does the performance obligation meet any of the criteria or recognition of revenue over time?

2.How should the entity recognize revenue for the satisfaction of its performance obligation? What amount of revenue should be recognized for the following periods:

2a.The three months ended June 30, 20X1?

2b.The three months ended September 30, 20X1?

2c.The three months ended December 31, 20X1?

How should we journalize the recognition of revenue using the input method?

At June 30, 2017, the end of its most recent fiscal year, Blue Computer Consultants’ post-closing trial balance was as follows:

The company underwent a major expansion in July. New staff was hired and more financing was obtained. Blue conducted the following transactions during July 2017, and adjusts its accounts monthly.

Adjustment data:

The chart of accounts for Blue Computer Consultants contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance. Prepaid Rent, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Notes Payable, Interest Payable, Income Taxes Payable, Salaries and Wages Payable, Unearned Service Revenue, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Advertising Expense, Income Tax Expense, Interest Expense, Rent Expense, Supplies Expense, and Utilities Expense.

Prepare an adjusted trial balance.

1. Why are the long-lived assets and inventory assertions of existence said to have an inherent risk of material misstatement that is higher than that of the account payable?

2. Do you think the blank confirmation is included in the positive or negative confirmation? Also explain what the advantages and disadvantages of each type of confirmation are, along with what kind of situation it is suitable to use!

3. Why is a cash account said to have a high inherent risk of possible fraud? Explain some of the controls related to cash accounts!

4. You are an auditor at a public accounting firm. You are conducting an audit for the financial year ending December 31, 2019. Your client has go public. This client is a property development company. Your client builds property in the form of apartment units, housing / real estate and also property investment products in the form of lots ready to build. In addition, this client also has a project development cooperation with its customers. The client is bound by a contract signed by both parties before a notary for the construction of a project with this customer. The project has not been completed 100%, however, the client says that the project has been completed 60% and the client acknowledges 60% of the development as revenue in the 2019 financial year.
Question:
a. In your opinion, as an auditor, what account should the client classify the apartment and housing / real estate complex be? Explain your answer!
b. What is the audit procedure that you will apply to ensure the recognition of revenue that is 60% of the project!
c. What audit evidence will you examine and what are the related assertions? Explain your answer!

5. You are an auditor at a public accounting firm. You and your team are entrusted by Partner to handle clients engaged in the home appliance retail business. Your client is a company that has go public. The client's financial statement in the previous year reported a loss, however this year reported a material gain. After you check, it turns out that the client reports income that is not much different from the previous year, however, there can be a profit due to the decrease in Cost of Goods Sold (COGS). The client reports that the amount of inventory has increased drastically, even though sales have not increased and the account payable balance is almost the same as in previous years, this has led to suspicion of a double counting scheme in the client's inventory. In addition, when a random check was carried out incidentally at one of the client's warehouses, it was found that many inventory were out of date but the client did not make adjustments.
Question:
a. If you wanted to perform an analytical procedure to check the suspected occurrence of this double counting scheme, what ratio would you calculate? Explain your answer!
b. What assertions are related to the above case? Explain your answer!

6.Your client Corp A is a company engaged in the production of heavy equipment and markets its products on a business to business (B2B) basis. Goods produced by Corp A are heavy equipment such as: Excavators, Bulldozers, Mobile Cranes, Motor Scrapers, etc. There are also a number of finished products in the form of heavy equipment which are self-used by Corp A. After several years of self-use, that heavy equipment is sold, which is in the fiscal year that you are currently auditing. Corp A recorded it as sales revenue which is increased their operating profit.
Question:
a. Do you think that recognize it as sales revenue is correct? Explain your answer!
b. What audit objectives relate to the above case! Explain your answer!

NCU Medical Group (NCU MG) is a profitable and very busy multi-specialty group practice. As a part of its growth strategy, NCU MG is considering purchasing one of three medical practices in the community. Each of the practices provides a unique strategic advantage that is aligned with NCU MG’s long-term plans.

Senior Clinic is located in a community offering extensive and very popular services for older patients. Junior Clinic serves a growing but younger population with the largest population of children in the area. Sports Clinic provides sports medicine services and is the preferred provider for the local all-state high school teams as well as the local college sports programs.

As the vice president of operations for NCU MG, you’ve been asked to lead this effort and recommend a decision to the board. Although all three practices are very attractive and have expressed an interest in being acquired, the board will only choose one. The others may be considered at a later date.

You’ve collected the following data related to acquisition costs, cash inflows, and overhead expenses for the next 5 years. The cost of capital is determined to be 11%:

• Senior Clinic will cost $20M to acquire. Additionally, there are several roofing and facility maintenance needs that will cost $200,000 in Year 1, and $150,000 in Year 2. Finally, lab services will cost $100,000 per year beginning in Year 1. Expected cash inflows from Senior Clinic are $4.5M, $8.5M, $10.265M, $11M, and $500K for Years 1 to 5.
• Pediatric Clinic will cost $19M to acquire. The practice is only two years old, and the facilities are in excellent condition. However, the clinic will have debt payments of $130,000 in Years 4 and 5. Finally, Pediatric Clinic has a lab outreach program that generates $20,000 in revenue every year beginning in Year 1. Half of this revenue will flow to NCU MG. In addition to the lab revenue, expected cash inflows from Pediatric Clinic are $6M, $6.5M, $7M, $7.5M, and $8M for Years 1 to 5.
• Sports Clinic will cost $21M to acquire. The clinic is in a state-of-the-art facility with owned and leased equipment. Annual lease payments are $90,000 per year and maintenance agreement costs are $50,000 per year, both beginning in Year 1. Finally, the clinic receives $75,000 per year from the local college for medical coverage beginning in Year 1, all of which will flow to NCU MG. In addition to the college revenue, expected inflows from Sports Clinic are $9M, 7.5M, $8.5M, $6M, and $3.25M for Years 1 to 5.

In addition to the above information, you’ve determined that for the selected clinic, the NPV probabilities are:

• 20% for the worst-case scenario
• 60% for the most-likely scenario
• 20% for the best-case scenario

Finally, the board would like your recommendation on other financing options. Ignoring the previous 11% cost of capital, you’ve discovered that:

• equity financing costs 15%
• 20% debt financing costs 10% (after tax) with equity costing 16%
• 45% debt financing costs 11% (after-tax) with equity costing 17%

As VP-Operations for NCU MG, assess each clinic option. In your assessment, develop tables showing the NPV and IRR for each option. After selecting a clinic to recommend, determine its expected NPV and make a financing (equity and/or debt) recommendation to the board.

At June 30, 2017, the end of its most recent fiscal year, Blue Computer Consultants’ post-closing trial balance was as follows:

The company underwent a major expansion in July. New staff was hired and more financing was obtained. Blue conducted the following transactions during July 2017, and adjusts its accounts monthly.

Adjustment data:

The chart of accounts for Blue Computer Consultants contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance. Prepaid Rent, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Notes Payable, Interest Payable, Income Taxes Payable, Salaries and Wages Payable, Unearned Service Revenue, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Advertising Expense, Income Tax Expense, Interest Expense, Rent Expense, Supplies Expense, and Utilities Expense.

Prepare a trial balance at July 31