Questions by guadalupe20 - Page 36

P2-2 Determining Financial Statement Effects of Various Transactions, and Interpreting the Current Ratio LO2-3, 2-4, 2-6 East Hill Home Healthcare Services was organized on January 1, 2019 by four friends. Each organizer invested $10,000 in the company and, in turn, was issued 8,000 shares. To date, they are the only shareholders. At the end of 2020 , the accounting records reflected total assets of $794,000 ( $62,000 cash, $540,000 land, $62,000 equipment, and $130,000 buildings), total liabilities of $284,000 (short-term notes payable of $110,000 and long-term notes payable of $174,000), and shareholders' equity of $510,000 ( $100,000 contributed capital and $410,000 retained earnings). The following summarized events occurred during January 2021 : a. Sold 9,000 additional shares to the original organizers for a total of $90,000 cash. b. Purchased a building for $50,000, equipment for $13,000, and four acres of land for $10,000; paid $13,000 in cash and signed a note for the balance (due in 15 years). (Hint: Five different accounts are affected.) c. Sold one acre of land acquired in (b) for $3,500 cash to another company. d. Purchased short-term investments for $14,500 cash. e. One shareholder reported to the company that he sold 400 East Hill shares to another shareholder for $4,000 cash. f. Lent $5,600 to one of the shareholders for moving costs, receiving a signed six-month note from the shareholder. Required: 1. Was East Hill Home Healthcare Services organized as a sole proprietorship, a partnership, or a corporation? Sole proprietorship Partnership Corporation 2. During January 2021 , the records of the company were inadequate. You were asked to prepare the summary of the preceding transactions. To develop a quick assessment of their economic effects on East Hill Home Healthcare Services. (If a transaction does not require an entry, leave the cells blank. Enter any decreases to account balances with a minus sign.) 3. This part of the question is not part of your Connect assignment. 4. Based only on the completed tabulation, provide the following amounts at January 31,2021.
1. (5 points) The intercept in y; = Bo + Bx + u tells us. (a) The expected value of y, when x = x (b) The expected value of y; when x = 0. (c) The effect of x on y (d) None of the above 2. (5 points) Which assumption is NOT requied for OLS to be the best linear unbiased estimator (BLUE). (a) Linearity (b) No perfect colinearity (c) Exogeneity (d) Homoskedasticity. (e) Non autocorrelation (f) Normality of error term (g) All of the above are required for OLS to be BLUE. 3. (5 points) By specifying that a hypothesis test should be run at the a percent level, we are saying that (a) We are OK with rejecting the null hypothesis when a percent of the time, the null is actually true (b) We are OK with failing to reject the null hypothesis when a percent of the time, the null is actually false (c) Our estimate is within a percent of the true population parameter. (d) both A and B (e) None of the above 4. (5 points) If we have a log-linear model, the we interpret the coefficient on x as (a) A one unit increase in x leads to a 100 x 8 percent increase in y (b) A one percent increase in x leads to a 100 x unit increase in y (c) A one percent increase in x leads to a 3 percent increase in y (d) A one unit increase in x leads to a 3 unit increase in y (e) none of the above 5. (5 points) Suppose we run the regression y = o+BDi+ui, where D; is an indicator variable for whether individual i received treatment. What is the interpretation of ? (a) The expected value of y for the treated group. (b) The expected value of y for the untreated group (c) The difference in the expected value of y for the treated group relative to the control group. (d) The effect of a one unit increase in treatment intensity on y (e) None of the above 6. (5 points) Suppose we have the model y = Bo + Bixi + B Di + B3x Di + u. What is the interpretation of the 33? (a) The effect of x; on y when D = 1 (b) The effect of x on y (c) The effect of x; on y when D; = 0 (d) The effect of x; on y for treated relative to the untreated group (e) None of the above