Problem 17-11 Terms of Sale [LO 2]

References

eBook & Resources

Problem 17-11 Terms of Sale [LO 2]

References

eBook & Resources

1)A matched pairs design is often used to compare two products such as colas. Each subject tastes both colas in random order without knowing which cola he/she is tasting. The subject then selects his/her preferred cola. Suppose 64% of 75 subjects preferred brand A.

A) What is the p-value for the hypothesis test of no brand preference?

a) 0.64

c) 0.015

d) 0.008

B) What sample size would be needed to ensure that the margin of error in the brand preference is less than 5 percentage points in more than 95% of experiments?

a)20

b)385

c)40

d)1500

Fill in the blanks. Options are Customer, Financial, Internal Business, Learning and Growth

Consider the following key performance​ indicators, and classify each indicator according to the balanced scorecard perspective it addresses. Choose from the financial​ perspective, customer​ perspective, internal business​ perspective, and the learning and growth perspective.

Pendergast, Inc., has no debt outstanding and a total market value of $180,000. Earnings before interest and taxes, EBIT, are projected to be $23,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 30 percent lower. Pendergast is considering a $75,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Pendergast has a tax rate of 35 percent.

A-1 Calculate the earning per share EPS under each of the three economic scenarios before any debt is issued. (Round your answers to 2 decimal places. (e.g., 32.16))

A-2 Calculate the percentage changes in EPS when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign.)

B-1 Assume that the company goes through with recapitalization. Calculate earnings per share (EPS ) under each of the three economic scenarios assuming the company goes through with the recapitalization.

B-2 Given the recapitalization calculate the percentage changes in EPS when the economy expands of enters a recession.

A recent National Science Foundation (NSF) survey indicates that more than 20% of the staff in American research and development laboratories is foreign. Results of the study have been used for pushing legislation aimed at controlling the number of foreign workers in the United States. An organization of foreign-born scientists wants to prove that the NSF survey results do not reflect the true percentage of foreign workers in the U.S. labs. The organization collects a sample of 5,000 laboratory workers in all major labs in the country and finds that 876 are foreign.

a). At 5% level of significance, is there sufficient evidence to conclude that the NSF study overestimated the percentage of foreigners in American laboratories? Your conclusion must be in terms of the P-Value as well as setting up a Rejection Region. Show work.

b). Which statistical distribution should be applied in this situation and why? Explain carefully.

c). What type of error is possible and describe this error in terms of the problem.

d). Based on a 95% confidence level, what is the best case and worst case scenario regarding the percentage of foreigners in American laboratories?

e). Carefully interpret this interval estimation.

f). Using the results of part (d), explain carefully whether or not there is sufficient evidence to conclude that the NSF study overestimated the percentage of foreigners in American laboratories? Explain carefully.

Ghost, Inc., has no debt outstanding and a total market value of $273,600. Earnings before interest and taxes, EBIT, are projected to be $43,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 17 percent higher. If there is a recession, then EBIT will be 28 percent lower. The company is considering a $145,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,600 shares outstanding. Ignore taxes for questions a and b. Assume the company has a market-to-book ratio of 1.0 and the stock price remains constant.

c-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Assume the firm has a tax rate of 21 percent.  

c-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

c-3. Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

c-4. Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

-The weight of an organ in adult males has a​ bell-shaped distribution with a mean of

300 grams and a standard deviation of 40 grams. Use the empirical rule to determine the following.

a. About 95% of organs will be between what​ weights?

b. What percentage of organs weighs between 260 grams and 340 ​grams?

​(c) What percentage of organs weighs less than 260 grams or more than 340 ​grams?

​(d) What percentage of organs weighs between 220 grams and 340 ​grams?

-Scores of an IQ test have a​ bell-shaped distribution with a mean of 100 and a standard deviation of 12.

Use the empirical rule to determine the following.​

(a) What percentage of people has an IQ score between 88 and 112​?

​(b) What percentage of people has an IQ score less than 88 or greater than 112​?

​(c) What percentage of people has an IQ score greater than 112

-Suppose babies born after a gestation period of 32 to 35 weeks have a mean weight of 2800 grams and a standard deviation of 800 grams while babies born after a gestation period of 40 weeks have a mean weight of 3000 grams and a standard deviation of 475 grams. If a 33​-week gestation period baby weighs 3075 grams and a 41​-week gestation period baby weighs 3275 ​grams, find the corresponding​ z-scores. Which baby weighs more relative to the gestation​ period?

-In a certain​ city, the average​ 20- to​ 29-year old man is 69.8 inches​ tall, with a standard deviation of 3.0 ​inches, while the average​ 20- to​ 29-year old woman is 64.5 inches​ tall, with a standard deviation of 3.9 inches. Who is relatively​ taller, a​ 75-inch man or a​ 70-inch woman?

-A manufacturer of bolts has a​ quality-control policy that requires it to destroy any bolts that are more than 4 standard deviations from the mean. The​ quality-control engineer knows that the bolts coming off the assembly line have mean length of 12 cm with a standard deviation of 0.05 cm. For what lengths will a bolt be​ destroyed?

#5 – CH 10/11 TANGIBLE ASSETS AND ADJUSTMENTS

You are engaged in the examination of the financial statements for Luke Ltd for the current year ended December 31. The analysis that follows for tangible capital assets and related accumulated amortization was prepared by the client. You have verified the opening balances to your prior year’s working paper file.

Your examination reveals the following information:

1. All plant and equipment were depreciated on the straight-line basis (no residual value taken into consideration) using the following estimated lives: buildings, 25 years; all other items, 10 years. The company’s policy was to take one-half year’s depreciation on all asset acquisitions and disposals during the year.

2. On April 1, the company entered into a 10-year lease contract for a die-casting machine with annual rentals of $8,000 payable in advance every April 1. The lease could be cancelled by either party (60 days written notice is required) and there was no option to renew the lease or buy the equipment at the end of the lease. The estimated useful life of the machine was 10 years with no residual value. The company recorded the die casting machine in the Machine and Equipment account at $55,962, the present discounted value at the date of lease, and $2,798, applicable to the machine, was included in amortization expense for the year. (Hint: Leases with these conditions should not be capitalized nor should a liability be recognized.)

3. The company completed the construction of a wing on the plant building on June 30 of the current year. The useful life of the building was not extended by this addition. The lowest construction bid received was $51,000, the amount recorded in the Buildings account. Company personnel constructed the addition at a cost of $48,000 (materials, $24,000; labour, $15,000; and overhead, $9,000). The $3,000 difference was credited to an account called Gain on Self-Construction of Building Addition.

4. On August 18, $15,000 was paid for paving and fencing a portion of land owned by the company to be used as a parking lot for the employees. The expenditure was charged to the Land account.

5. The amount shown in the machinery and equipment asset retirement column represents cash received on September 5 regarding disposal of a machine purchased in July 4 years ago, for $60,000. The bookkeeper recorded amortization expense of $4,500 on this machine in the current year.

6. The city of Moose Jaw donated land and a building appraised at $20,000 and $69,000 respectively to Luke Ltd. For a plant. On September 1, the company began operating the plant. Because the company paid nothing for these assets, the bookkeeper made no entry to record the transaction.

LUKE LTD.

Analysis of Capital Assets and

Related Accumulated Amortization Accounts

Current Year Ended December 31

Capital Assets

*Amortization expense for the year

Required:

Prepare the journal entries at current year end December 31 to adjust the accounts for the transactions noted above. Disregard income tax implications. The books have not been closed. Computations should be rounded to nearest dollar