Analysis Of Financial Time Series 2nd Edition Ruey S. Tsay - Solutions

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Because the highway is being built in an area with very unstable soils, Jensen believes it is not able to reasonably estimate the contract’s completion costs and thus uses the completedcontract method of accounting (U.S. GAAP) for this contract. Prepare the journal entry that Jensen would make at
Because the highway is being built in an area with very stable soils, Jensen believes it is able to reasonably estimate the contract’s completion costs and thus uses the percentageof-completion method of accounting for this contract. Prepare the journal entry that Jensen would make at the end of
Recognize revenue on an installment (cash collection) basis. LO.1
Recognize revenue at point of sale. LO.1
Recognize revenue when production is complete. LO.1
Prepare Heinkel’s journal entries for 2011 under each of the methods in requirement 1. LO.1
Calculate the amount of Heinkel’s net income each year, assuming that revenue and income are recognized:a. At the completion of production.b. At the point of sale.c. As cash is collected (installment method). LO.1
Give the journal entries that Tack would make in June 2011 to correct the errors made in 2010. Assume that depreciation for 2011 is made as a year-end adjusting entry.(Ignore taxes.) LO.1
What amount should Tack report as a prior period adjustment to beginning Retained earnings at January 1, 2011? (Ignore taxes.) LO.1
Give the journal entries that Bettner would make in 2011 to correct the errors. LO.1
Ignoring income taxes, what amount should Bettner report as a prior period adjustment to the beginning retained earnings in its statement of retained earnings at January 1, 2011? LO.1
Assume that York’s Rustic Furniture had instead used the installment sales method. What amount of gross profit would it have deferred in 2011? LO.1
How much cash did the company collect on installment sales in 2011? LO.1
Determine the amount of revenue to be recognized in 2011 and prepare the necessary journal entry. LO.1
Prepare a journal entry to record receipt of the cash payment. LO.1
Same scenario as requirement 4, except that collectibility of the remaining installments cannot be estimated. LO.1
At the time the franchise is signed, all the services promised have been provided, and collection of the franchise fee is assured. LO.1
At the time the franchise is signed, the value of the services rendered is estimated to be at least $10,000. The remaining services are performed equally over the five-year period, and collectibility of the franchise fee is assured. LO.1
Same scenario as requirement 1, except that collectibility of the remaining installments cannot be estimated. LO.1
At the time the franchise is signed, none of the services promised have been provided;however, at least 80 percent of the services have been provided on the date of the first installment. Collectibility of the franchise fee is reasonably assured. LO.1
Prepare the necessary journal entries for August 15, 2011 (ignore any interest accruals). LO.1
Prepare the necessary journal entries for Oversized Burrito for April 1, 2011, when the franchise agreement is signed. LO.1
Revenue recognized using the cost recovery method. LO.1
Revenue recognized using the installment sales method. LO.1
Revenue recognized at point of sale. LO.1
Revenue recognized when production is complete. LO.1
If the cost recovery method is used, what amount would Fox report as gross profit from sales for the year ended March 31, 2011? LO.1
What amount of net unearned franchise fees would Potter report at December 31, 2011? LO.1
Baker’s realized gross profit for 2012 was how much? LO.1
At December 31, 2011, Baker’s deferred gross profit was how much? LO.1
For a customer who pays the annual fee in advance, Rawl should recognize the related revenue in what amounts and when? LO.1
In Simmons’s December 31, 2011, balance sheet, at what amount should the unearned franchise fees from Jensen’s franchise be reported? LO.1
The Installment accounts receivable balances at December 31, 2011 and 2012 would be how much? LO.1
In its 2011 income statement, what amount of realized gross profit should Yardley report? LO.1
Calculate the amount of gross profit that would be recognized each year under the cost recovery method. LO.1
Calculate the amount of gross profit that would be recognized each year under the installment sales method. LO.1
In its income statement for the year ended December 31, 2012, what amount of gross profit should Haft report? LO.1
How much cash was collected on this contract in 2011? LO.1
What was the initial estimated total income before tax on this contract? LO.1
Recognize revenue when each performance obligation is satisfied. LO.1
Allocate the transaction price to the separate performance obligations. LO.1
Determine the transaction price. LO.1
Identify the separate performance obligations in the contract. LO.1
Identify the contract(s) with the customer. The proposed guidance indicates that the contracts may be written, oral, or implied. LO.1
The seller retains neither continuing management involvement associated with ownership nor effective control over the goods being sold. LO.1
The seller has transferred significant risks and rewards of ownership of the goods to the buyer. LO.1
Does Dot-com assume the risks of ownership such as possible losses from bad debts or returns? LO.1
Does Dot-com take title to the ticket? LO.1
Is Dot-com acting as a principal or as an agent/broker in the transaction? LO.1
Proposed changes that IASB and FASB are considering for contract-based revenue recognition? LO.1
Key differences between IFRS and U.S. GAAP rules for revenue recognition. LO.1
How error corrections and restatements of prior period financial statements are repor ted. LO.1
SEC guidance on revenue recognition designed to curb earnings management. LO.1
The various techniques used to manage earnings. LO.1
How the flexibility in GAAP for income determination invites managers to manipulate or manage earnings. LO.1
Specialized application of revenue recognition principles for franchise sales, sales with right of return, and“bundled” sales with multiple deliverable elements. LO.1
The procedures for recognizing revenue and adjusting associated asset values in three specific settings:long-term construction contracts, agricultural commodities, and installment sales. LO.1
The conditions under which it is appropriate to recognize revenues and profits either before or after the point of sale. LO.1
Why financial statements are valuable sources of information about companies. LO.1
How the demand for financial information comes from its ability to improve decision making and monitor managers’ activities. LO.1
How the supply of financial information is influenced by the costs of producing and disseminating it and by the benefits it provides. LO.1
How accounting rules are established, and why management can shape the financial information communicated to outsiders and still be within those rules. LO.1
Why financial repor ting philosophies and detailed accounting practices sometimes differ across countries. LO.1
Consider the monthly log stock returns, in percentages and including dividends, of Merck & Company, Johnson & Johnson, General Electric, General Motors, Ford Motor Company, and valueweighted index from January 1960 to December 1999; see the file m-mrk2vw.txt, which has six columns in the order
The file m-excess-c10sp-9003.txt contains the monthly simple excess returns of ten stocks and the S&P 500 index. The threemonth Treasury bill rate on the secondary market is used to compute the excess returns. The sample period is from January 1990 to December 2003 for 168 observations. The 11
Again, consider the ten stock returns in m-excess-c10sp9003.txt. The stocks are from companies in three industrial sectors.ABT, LLY, MRK, and PFE are major drug companies, F and GM are automobile companies, and the rest are big oil companies. Analyze the excess returns using the BARRA industrial
Again, consider the ten excess stock returns in the file mexcess-c10sp-9003.txt. Perform a principal component analysis on the returns and obtain the scree plot. How many common factors are there? Why? Interpret the common factors.
Again, consider the ten excess stock returns in the file mexcess-c10sp-9003.txt. Perform a statistical factor analysis. How many common factors are there if the 5% significance level is used?Plot the estimated factor loadings of the fitted model. Are the common factors meaningful?
Consider the monthly log returns of the S&P composite index, IBM stock, and Hewlett-Packard (HPQ) stock from January 1962 to December 2003 for 504 observations. The log returns are in the file m-spibmhpq6203.txt. Use the exponentially weighted movingaverage method to obtain a multivariate
Focus on the monthly log returns of IBM and HPQ stocks from January 1962 to December 2003. Fit a DVEC(1,1) model to the bivariate return series. Is the model adequate? Plot the fitted volatility series and the time-varying correlations.
Build a constant-correlation volatility model for the three monthly log returns of the S&P composite index, IBM stock, and HPQ stock. Write down the fitted model. Is the model adequate?Why?
The file m-spibmge.txt contains the monthly log returns in percentages of the S&P 500 index, IBM stock, and General Electric stock from January 1926 to December 1999. The returns include dividends. Focus on the monthly log returns in percentages of GE stock and the S&P 500 index. Build a
Focus on the monthly log returns in percentages of GE stock and the S&P 500 index. Build a time-varying correlation GARCH model for the bivariate series using a logistic function for the correlation coefficient. Check the adequacy of the fitted model, and obtain the 1-step ahead forecast of the
Focus on the monthly log returns in percentages of GE stock and the S&P 500 index. Build a time-varying correlation GARCH model for the bivariate series using the Cholesky decomposition.Check the adequacy of the fitted model, and obtain the 1-step ahead forecast of the covariance matrix at the
Consider the three-dimensional return series jointly. Build a multivariate time-varying volatility model for the data, using the Cholesky decomposition. Discuss the implications of the model and compute the 1-step ahead volatility forecast at the forecast origin t =888.
An investor is interested in daily value at risk of his position on holding long $0.5 million of Dell stock and $1 million of Cisco Systems stock. Use 5% critical values and the daily log returns from February 20, 1990 to December 31, 1999 to do the calculation. The data are in the file
Consider the ARMA(1,1) model yt − 0.8yt−1 = at + 0.4at−1 with at ~ N(0, 0.49). Convert the model into a state-space form using (a)Akaike's method, (b) Harvey's approach, and (c) Aoki's approach.
The file aa-rv-20m.txt contains the realized daily volatility series of Alcoa stock returns from January 2, 2003 to May 7, 2004; see the example in Section 11.1.The volatility series is constructed using 20-minute intradaily log returns.(a) Fit an ARIMA(0,1,1) model to the log volatility series and
Consider the monthly simple excess returns of Pfizer stock and the S&P 500 composite index from January 1990 to December 2003.The excess returns are in m-pfesp-ex9003.txt witeh Pfizer stock returns in the first column.(a) Fit a fixed-coefficient market model to the Pfizer stock return.Write down
Consider the AR(3) modelwhere {et} and {at} are independent and the initial values of xj with j ≤ 0 are independent of et and at for t > 0.(a) Convert the model into a state-space form.(b) If E(et) =c, which is not zero, what is the corresponding statespace form for the system? x = 1x11 +
The file m-ppiaco.txt contains year, month, day, and U.S.Producer Price Index (PPI) from January 1947 to August 2004. The index is for all commodities and not seasonally adjusted. Let zt =ln(zt) − ln (zt−1), where zt is the observed monthly PPI. It turns out that an AR(3) model is adequate for
Suppose that x is normally distributed with mean μ and variance 4. Assume that the prior distribution of μ is also normal with mean 0 and variance 25. What is the posterior distribution of μ given the data point x?
Consider the linear regression model with time series errors in Section 12.5.Assume that zt is an AR(p) process (i.e., zt = φ1 zt−1 +··· + φpzt−p + at). Let φ = (φ1,…,φp)′ be the vector of AR parameters. Derive the conditional posterior distributions of f(β | Y, X, φ,σ 2), f(φ |
Consider the linear AR(p) model in Section 12.6.1. Suppose that xh and xh+1 are two missing values with a joint prior distribution being multivariate normal with mean μo and covariance matrix ∑o.Other prior distributions are the same as that in the text. What is the conditional posterior
Consider the monthly log returns of General Motors stock from 1950 to 1999 with 600 observations: (a) build a GARCH model for the series, (b) build a stochastic volatility model for the series, and(c) compare and discuss the two volatility models.
Build a stochastic volatility model for the daily log return of Cisco Systems stock from January 1991 to December 1999. You may download the data from the CRSP database or the file dcsco9199.txt. Use the model to obtain a predictive distribution for 1-step ahead volatility forecast at the forecast
Build a bivariate stochastic volatility model for the monthly log returns of General Motors stock and the S&P 500 index for the sample period from January 1950 to December 1999. Discuss the relationship between the two volatility processes and compute the time-varying beta for GM stock.
Consider the daily stock returns of American Express (axp), Caterpillar (cat), and Starbucks (sbux) from January 1994 to December 2003. The data are simple returns given in the file d3stock.txt (date, axp, cat, sbux).(a) Express the simple returns in percentages. Compute the sample mean, standard
Answer the same questions as Exercise 1.1 but using monthly stock returns for IBM, CRSP value-weighted index (VW), CRSP equal-weighted index (EW), and S&P composite index from January 1975 to December 2003. The returns of the indexes include dividend distributions. Data file is m-ibm3dx7503.txt.
Consider the monthly stock returns of S&P composite index from January 1975 to December 2003 in Exercise 1.2.Answer the following questions:(a) What is the average annual log return over the data span?(b) Assume that there were no transaction costs. If one invested$1.00 on the S&P composite index
Consider the daily log returns of American Express stock from January 1994 to December 2003 as in Exercise 1.1.Use the 5%significance level to perform the following tests. (a) Test the null hypothesis that the skewness measure of the returns is zero. (b) Test the null hypothesis that the excess
Daily foreign exchange rates (spot rates) can be obtained from the Federal Reserve Bank in Chicago. The data are the noon buying rates in New York City certified by the Federal Reserve Bank of New York. Consider the exchange rates between the U.S. dollar and the Canadian dollar, euro, U.K. pound,
Suppose that the simple return of a monthly bond index follows the MA(1) model Rt = at + 0.2at−1, σa = 0.025.Assume that a100 = 0.01.Compute the 1-step and 2-step ahead forecasts of the return at the forecast origin t = 100. What are the standard deviations of the associated forecast errors?
Suppose that the daily log return of a security follows the model rt = 0.01 + 0.2rt−2 + at, where {at} is a Gaussian white noise series with mean zero and variance 0.02.What are the mean and variance of the return series rt? Compute the lag-1 and lag-2 autocorrelations of rt. Assume that r100
Consider the monthly U.S. unemployment rate from January 1951 to February 2004 in the file m-unemhelp.txt. The data are seasonally adjusted and obtained from the Federal Reserve Bank in St. Louis. Build a time series model for the series and use the model to forecast the unemployment rate for
Consider the monthly simple returns of the Decile 1, Decile 5, and Decile 10 of NYSE/AMEX/NASDAQ based on market capitalization. The data span is from January 1960 to December 2003, and the data are obtained from CRSP.(a) For each return series, test the null hypothesis that the first 12 lags of
Consider the daily simple returns of IBM stock from 1962 to 2002 in the file d-ibmvwew6202.txt. Compute the first 100 lags of the ACF of the absolute daily simple returns of IBM stock. Is there evidence of long-range dependence? Why?
Consider the demand for electricity of a manufacturing sector in the United States. The data are logged, denote the demand of a fixed day of each month, and are inpower6.txt. Build a time series model for the series and use the fitted model to produce 1-step to 24-step ahead forecasts.
Consider the daily simple return of CRSP equal-weighted index, including distributions, from January 1980 to December 1999 in file d-ew8099.txt (date, ew). Indicator variables for Mondays, Tuesdays, Wednesdays, and Thursdays are in the first four columns of wkdays8099.txt. Use a regression model to
As demonstrated by the prior exercise, daily returns of equalweighted index have some weekday effects. How about daily returns of S&P composite index? To answer this question, consider the daily returns of S&P composite index from January 3, 2000 to December 31, 2003. The data are in the file

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Analysis Of Financial Time Series 2nd Edition Ruey S. Tsay - Solutions

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