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data analytics accounting

Introduction To Data Analytics For Accounting 2nd Edition Vernon Richardson, Katie Terrell And Ryan Teeter - Solutions

(LO 7-2, LO 7-3) Match the diagnostic analytics to the appropriate example or definition. Diagnostic Analytics Separation of duties Management by exception Two-sample t-test difference of means Benford's law Duplicate check Diagnostic Analytics Example/Definition There are expected to be more
(LO 7-2) Which party needs to adjust its cash balance once learning about the following reconciling items? Reconciling Item Error Outstanding check NSF check Outstanding deposit Notes/interest collected by the bank Bank service fees Who needs to adjust the cash balance? Company (general ledger),
(LO 7-2, LO 7-3) Name the appropriate diagnostic analytics technique utilized to find each type of anomaly. Choose from regression analysis, drill-down detail, Benford’s law, duplicate check, and controls testing. Type of Anomaly Three cents of every dollar invested in advertising translates into
(LO 7-2) For which of the various potential transactions would analysis using Benford’s law be useful to perform? Transactions $500 is the minimum refund ATM withdrawals are in $20 denominations ($20, $40, $60, etc.) Each sales transaction amount Each participant receives $100 if they
(LO 7-2) The equation log10(1 + (1/d)), where d is each digit 1, 2, and so on, gives the expectation of the frequency of Benford’s law for each digit.Required:1. Calculate the expected distribution for each digit.2. Plot the results on a graph to get a graph of the expected distribution for all
(LO 7-2) Download the “Population of Countries of the World” dataset in Excel from Connect (Dataset original source accessed May 2020: https://en.wikipedia.org/wiki/List_of_countries_by_population_(United_Nations) ). Assess the first digit for population of countries of the world using
(LO 7-3) Download the “R&D Expenditures and Revenues” dataset in Excel from Connect. Assess the relationship between R&D Expenditures and Sales Revenue by computing correlations and visualizing the relationship.Required:1. Calculate the correlation between R&D Expenditures and Revenues. Do the
(LO 7-3) Download the “R&D Expenditures and Revenues” dataset in Power BI or Tableau from Connect. Assess the relationship between R&D Expenditures and Sales Revenue by creating scatterplots and visualizing the relationship. (In Tableau, for example, drag R&D Expenditures to the Columns and
(LO 7-3) Download the “R&D Expenditures and Revenues” dataset from Connect into your preferred software tool. Assess the relationship between R&D Expenditures and Revenue by performing a regression. (Hint: Completion of Lab 7-9 may be helpful before completing this lab).Required:1. Perform a
(LO 8-2) Which predictive analytics technique would be used to predict whether a firm is likely to go bankrupt in the coming year?a. Regressionb. Classificationc. Benford’s lawd. Monetary unit sampling
(LO 8-2, LO 8-3) Which predictive analytics technique would be used to predict the interest rate given from a lender (bank) to a borrower?a. Regressionb. Classificationc. Benford’s lawd. Monetary unit sampling
(LO 8-2) Would a greater amount of working capital/total assets lead to more bankrupt or less bankrupt firms?a. More bankruptb. Less bankrupt
(LO 8-2) If a company has an Altman Z-score of 2.8, the company would be classified in the .a. distress zone, or at significant risk of bankruptcyb. gray zone, or at risk of bankruptcyc. safe zone, not currently at risk of bankruptcy
(LO 8-5) According to the text, prefers -basis accounting since it is better at forecasting future performance.a. GAAP, cashb. GAAP, accrualc. tax accounting, cashd. tax accounting, accrual
(LO 8-5) Which is more persistent in predicting future amounts of the variable based on current amounts of that same variable?a. Cash flows from operating activitiesb. Cash flows from investment activitiesc. Operating incomed. Cash flows from financing activities
(LO 8-5) The persistence of as compared to is consistent with GAAP requiring the use of accrual accounting for financial reporting purposes.a. sales; operating incomeb. operating income; cash flows from operating activitiesc. sales; cash flows from operating
(LO 8-2) Predicting which companies are likely to be fraudulent/not fraudulent or likely to be bankrupt or not bankrupt are examples of .a. classificationb. predictionc. regressiond. time series analysis
(LO 8-2) All of the following are factors used by Altman’s Z in predicting bankruptcy except:a. Sales/Total assetsb. Market value of stockholders’ equity/Book value of total debt owedc. Retained Earnings/Total assetsd. Income/Total assets
(LO 8-2) According to Beneish, which of the following factors are predictive of financial statement fraud?a. Sales/Total assetsb. Market value of stockholders’ equity/Book value of total debt owedc. Net Income/Total assetsd. Decrease in depreciation expense
(LO 8-5) Predicting future operating income would be an example of which type of predictive analytics?a. Time seriesb. Regressionc. Classification
(LO 8-7) A software program that automates certain repeatable tasks is called .a. machine learningb. automated task repetitionc. robotic process automationd. predictive automation
(LO 8-2) Classification analysis to decide on client acceptance or rejection is most important for .a. lendersb. auditorsc. audit regulatorsd. investors
(LO 8-4) Not considering historical averages when making predictions of possible future events is known as .a. base rate fallacyb. base rate ignorancec. historical rate fallacyd. historical rate ignorance
(LO 8-2) Predictive analytics technique to separate a sample (or population) into one or more groups or classes is called .a. regressionb. classificationc. time seriesd. forecasting
(LO 8-1) How is predictive analytics different from descriptive or diagnostic analytics?
(LO 8-2) How does Altman’s Z work in predicting bankruptcy? How could we test it to see if it still makes good predictions today?
(LO 8-2) Why is a potential borrower’s employment history an important component of determining whether to extend a loan?
(LO 8-2, LO 8-3) Why are credit history and credit score good predictors of the appropriate interest rate to be offered to a borrower?
(LO 8-2, LO 8-3) How is predicting what interest rate Lending Club will give its customers a regression exercise, as opposed to a classification activity?
(LO 8-2) Why is deciding to resign from a potentially risky audit client an important decision for an auditor?
(LO 8-2, LO 8-3) Would the use of analytics to predict whether a student will pass or fail a class be a classification or regression exercise? Why?
(LO 8-3) How does regression analysis identify cost drivers and help a company allocate overhead?
(LO 8-3) In the regression model, Total production costs = β0 + β1 (board feet), why is β0 considered to be the total fixed costs and β1 an estimate of the variable cost per board foot?
(LO 8-3) Given Exhibit 8.4, which would have a higher expected return, a share of stock of a risky company or a U.S. Treasury bond?
(LO 8-4) Why do base rates need to be incorporated into a prediction activity?
(LO 8-5) Why is persistence an important quality for using the past to predict the future?
(LO 8-5) Given the discussion associated with persistence, explain why GAAP requires accrual-basis accounting instead of cash-basis accounting.
(LO 8-2; LO 8-3) Label each of the following predictive analytics as either classification or regression. Example of Predictive Analytics Loan acceptance/loan rejection Interest rate given to borrowers Bankruptcy prediction Predicting stock market returns Fraud or no fraud found in financial
(LO 8-1) Label each of the following as either descriptive, diagnostic, or predictive analytics. Example of Analytics Outlier analysis Misstatement or no misstatement analysis Controls testing Predicting stock market returns Fuzzy matching Descriptive, Diagnostic, or Predictive Analytics
(LO 8-1) Label each of the following as either descriptive, diagnostic, or predictive analytics. Example of Analytics Benford's law Loan acceptance/rejection Sequence check for missing checks Growth in earnings over the past 5 years At high risk of bankruptcy/at low risk of bankruptcy Descriptive,
(LO 8-2) Label each Beneish (1999) factor as to whether the increase or decrease in the factor is associated with predicting fraudulent financial statements Beneish Factor Receivables Gross margin Asset quality Sales growth Depreciation expense Increase or Decrease Associated with Fraudulent
(LO 8-2) Which of the following are factors in predicting bankruptcy according to Altman’s Z? Potential Factor in Predicting Bankruptcy Factor in Predicting Bankruptcy? (Yes/No) Working capital/Total assets Return on equity Sales/Total assets Sales growth Depreciation expense Retained
(LO 8-2) Classify each of the Altman’s Z-scores as either in the distress zone, gray zone, or safe zone with respect to risk of bankruptcy. Altman Z-Score 1.81 3.05 2.57 1.03 5.73 -0.25 Distress Zone, Gray Zone, or Safe Zone
(LO 8-2; LO 8-4) What is the expected relationship between the following factors and the likelihood of loan acceptance by lender? Factors Associated with Lender Loan Acceptance Amount of requested loan Employment length Debt-to-income ratio Level of Income Own house (instead of rent) Credit score
(LO 8-5) Download the Hiking Shoe Demand Time Series dataset in Excel which has hiking shoe sales over 48 months from January 2021 to December 2024. (Hint: It may be helpful to complete Lab 8-6 before completing this problem).Required 1. Use Excel’s Forecast Sheet to perform time series analysis
(LO 8-5) Perform time series analysis predicting monthly hiking shoe demand as Problem 5, but using the forecast capabilities of Tableau. To do so, forecast exactly 3 years ahead and do not ignore any quarters of data. (Hint: It may be helpful to complete Lab 8-7 before completing this
(LO 8-5) Perform time series analysis predicting hiking shoe demand as Problem 5, but using the forecast capabilities of Power BI. To do so, forecast exactly 3 years ahead.(Hint: It may be helpful to complete Lab 8-8 before completing this lab).Required What is the expected hiking shoe demand in
(LO 8-3) Download the Hiking Shoe Demand Predictors dataset in Excel which has hiking shoe sales over 48 months from January 2021 to December 2024. The companies believe that the three predictors of monthly sales are Gross Domestic Product(GDP), the weather (average temperature) and whether it was
(LO 9-3) A payment is made all at once, at one time, is called a(n) .a. annuityb. lump-sum paymentc. sunk costsd. capital payment
(LO 9-3) is calculated to be the point where the present value of cash inflows is equal to the present value of cash outflows.a. Net present valueb. Internal rate of returnc. Capital budgetingd. Marginal analysis
(LO 9-5) An analysis of future events performed by the probability of those events and the potential outcomes is called .a. prescriptive analyticsb. make-or-buy analysisc. scenario analysisd. sensitivity analysis
(LO 9-1) analytics is defined as analysis performed to provide foresight by identifying patterns in historical data by judging likelihood or probability.a. Predictiveb. Datac. Prescriptived. Diagnostic
(LO 9-6) Evaluating the outcomes based on uncertainty regarding the inputs is called .a. prescriptive analyticsb. financial modelingc. scenario analysisd. sensitivity analysis
(LO 9-2) The decision of whether to add an additional part-time employee or a full-time employee would be considered to be .a. marginal analysisb. make-or-buy analysisc. scenario analysisd. financial modeling
(LO 9-3) An objective of financial accounting is to help present potential investors, creditors and other users in assessing the , , and uncertainty of prospective cash receipts.a. amounts; timingb. risk; timingc. risk; persistenced. amounts; risk
(LO 9-2) We call the analysis of deciding whether to outsource certain aspects of producing a product or service .a. sensitivity analysisb. make-or-buy analysisc. scenario analysisd. financial modeling
(LO 9-3) The decision of what big project to invest in is traditionally called .a. cash flow analysisb. net present value analysisc. internal rate of returnd. capital budgeting
(LO 9-3) What is the internal rate of return for this stream of cash flows for a $32,000 investment (−$32,000) and cash inflows of $9,000 per year for Years 1–4? Use the Excel IRR() function for your calculation.a. 3.25 percentb. 4.88 percentc. 7.18 percentd. 2.39 percent
(LO 9-3) What is the net present value for this stream of cash flows for a $32,000 investment (−32,000) and cash inflows of $9,000 per year for Years 1–4, assuming a 3 percent cost of capital? Use the Excel NPV() function for your calculation.a. −$1,312.66b. $1,453.89c. $1,312.66d.
(LO 9-3) What would be the Excel formula to compute the internal rate of return for this stream of cash flows for a $32,000 investment and cash inflows of $10,000 per year for Years 1–4?a. =IRR(32000,−10000,−10000,−10000,−10000)b. =IRR(−10000,−10000,−10000,−10000,32000)c.
(LO 9-3) What would be the Excel formula to compute the net present value for this stream of cash flows for an initial $50,000 investment and cash inflows of $18,000 per year for Years 1–4 with a 10 percent cost of capital?a. =NPV(0.1,18000,18000,18000,18000)-50000b.
(LO 9-2) In make-or-buy analysis, a key input to the decision is all but which of the following?a. Avoidable fixed costsb. Avoidable variable costsc. Cost by the contract manufacturerd. The sales price of the product being manufactured
(LO 9-3) is the present value of cash inflows less the present value of cash outflows.a. Net present valueb. Internal rate of returnc. Capital budgetingd. Marginal analysis
(LO 9-3) All other things being equal, we would choose the investment with the accounting rate of return.a. lowestb. highestc. equivalent
(LO 9-3) All other things being equal, we would choose the investment with what kind of payback period?a. Fastest payback periodb. Slowest payback period
(LO 9-7) Which technique may work to maximize profits by varying product prices subject to certain constraints?a. Optimizationb. Cash flow analysisc. Sensitivity analysisd. Goal seek analysis
(LO 9-1) What is the most important difference between predictive and prescriptive analytics? Why is prescriptive analytics needed?
(LO 9-3) If the net present value of each investment is greater than zero, how do you choose the best investment?
(LO 9-3) How are NPV and IRR both useful in evaluating investments and returns to those investments?
(LO 9-2) Why would the decision to sell additional units to a customer at a reduced price be considered marginal analysis?
(LO 9-2) Why does marginal analysis ignore sunk costs?
(LO 9-5) How would you set up the scenario analysis for a Chinese company if it faces a different level of potential tariffs from the U.S. government? How would you consider the potential effect of 10, 25, or 50 percent tariffs on a major Chinese exporter?
(LO 9-2) Why will a make-or-buy decision help a company determine its core competencies?
(LO 9-5) In the chapter, we showed examples of scenarios detailing the effect of changes of the tax law on the company’s after-tax net income. Why is this type of analysis important?
(LO 9-6) Sensitivity analysis examines the effect of changing one input on an outcome variable. Let’s imagine that Lufthansa, a German airline, is trying to prepare for the possibility that fuel prices increase by 10 to 20 percent. What would be the input and the outcome Lufthansa might use in a
(LO 9-7) How does optimization meet the definition of prescriptive analytics?
(LO 9-7) What is the objective of optimizing product mix or optimizing product pricing based on resource constraints?
(LO 9-3) Match the prescriptive analytics term to its definition. Prescriptive Analytics Term Net present value Internal rate of return Annuity Lump sum payment Prescriptive analytics Descriptive analytics Prescriptive Analytics Definition Analysis performed that identifies best possible options
(LO 9-2; 9-3; 9-5; 9-6) Match the prescriptive analytics term to its definition. Prescriptive Analytics Term Make-or-buy analysis Scenario analysis Marginal analysis Sensitivity analysis Capital budgeting Prescriptive Analytics Definition Evaluating the outcomes based on uncertainty regarding the
(LO 9-2; 9-5; 9-6; 9-7) Match the prescriptive analytics term to its example Prescriptive Analytics Term Make-or-buy analysis Scenario analysis Marginal analysis Sensitivity analysis Optimization Prescriptive Analytics Example Should FedEx hire one more full-time driver or ask the existing drivers
(LO 9-5) Arvest Bank is doing some scenario analysis. It believes the prime interest rate for business loans will change from their current 4 percent to either 5 or 3 percent in the next year. There will be no change in their $3,000,000 income at the 4 percent interest level, but net income will
(LO 9-5) First National Bank is doing some scenario analysis. It believes that its source of funds (the Federal Reserve) will soon increase the cost of loans. In fact, the cost of making loans is expected to change from the current 2 percent interest to either 3 or 4 percent interest in the next
(LO 9-3) Use the Excel NPV() function to calculate the maximum loan you can expect to receive if you promise to pay back 5 years of $12,000 payments at 5 percent interest.
(LO 9-3) Use the Excel NPV() function to calculate the maximum loan you would be willing to give today for a borrower that would make 8 years of $18,000 annual payments at 10 percent annual interest.
(LO 9-3) If you hope to retire in 20 years with $3 million saved, expect to get a 12%annual return, and you have nothing currently saved, how much would you need to save each year? Use the Excel PMT() function to calculate how much you need to save each year. (Hint: As part of the Excel PMT()
(LO 9-3) If you hope to retire in 40 years with $4 million saved, expect to get a 10%annual return, and you have $20,000 currently saved, how much would you need to save each year? Use the Excel PMT() function to calculate how much you need to save each year. (Hint: As part of the Excel PMT()
(LO 9-3) Arkansas Best Freightways is considering a purchase of three different potential trucks. it is considering three different investment scenarios and their respective cash flows. Arkansas Best Freightways uses a cost of capital of 9 percent to evaluate the investments.Required:1. Calculate
(LO 9-3) Arkansas Best Freightways is considering a purchase of three different potential trucks but is uncertain of the cash inflows associated with the following investment scenarios.Required:1. Use the Excel IRR() function to calculate the internal rate of return for each of the three possible
(LO 9-6) The legislature is considering changing tax rates from 7 percent to either 6 or 5 percent. Pathways Landscaping Equipment is trying to understand the impact of these changes and is using scenario analysis to assess the expected value of the impact.Before any changes are made, the base case
(LO 9-3) Evaluate the future cash flows for the dataset, To MBA or Not To MBA, in Excel.(Dataset is available via Connect Additional Student Resources.) Calculate the net present value (NPV) for those individuals deciding to pursue an MBA, or to not pursue an MBA. To do so, evaluate the future cash
(LO 9-6) This exhibit provides an example of a sensitivity analysis that might be performed by financial analysts. In their estimation, the two most important inputs to determine the estimated stock price is the cost of capital and sales growth in the future. To perform sensitivity analysis, they
(LO 9-6) This exhibit provides an example of a sensitivity analysis that might be performed by management accountants, evaluating the changing profitability based on two important inputs, the level of total fixed costs, and the sales price.To perform sensitivity analysis, the analysis varies the
(LO 10-2) Line charts should only be shown in order to emphasize.a. descending; trendb. chronological; trendc. alphabetical; proportiond. ascending; proportion
(LO 10-2) Pie charts lend themselves well to data showing proportions.a. categoricalb. numericalc. diagnosticd. predictive
(LO 10-2) are observations on values taken on by a variable at different points in time.a. Cross-sectional datab. Categorical datac. Numerical datad. Times series data
(LO 10-2) are brief summaries (or factoids) of a dataset that provide a representation of the dataset as a whole.a. Predictive statisticsb. Prescriptive statisticsc. Diagnostic statisticsd. Descriptive statistics
(LO 10-4) show values of two variables each plotted on its own axis to exhibit potential .a. Scatter plots; trendsb. Scatter plots; correlationc. Graphs; correlationd. Graphs; trends
(LO 10-3) Correlations, scatter plots, regression results, and time series analysis are generally associated with analytics.a. predictiveb. prescriptivec. diagnosticd. descriptive
(LO 10-3) Diagnostic analytics includes which type of visualizations?a. Box plotsb. Scatter plotsc. Pivot chartsd. Times series
(LO 10-4) Scatter plots are more meaningful if they include a .a. time series predictionb. box plotc. trend lined. categorical variable

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