Problem 5E

In Exercise 6.1-5, data are given for the number of $1 bets a player can make in roulette before losing $5. Use those data to respond to the following:

(a) Determine the order statistics.

(b) Find the five-number summary of the data.

(c) Draw a box-and-whisker diagram.

(d) Find the locations of the inner and outer fences, and draw a box plot that shows the fences, the suspected outliers, and the outliers.

(e) In your opinion, does the median or sample mean give a better measure of the center of the data?

Reference Exercise 6.1-5

In the casino game roulette, if a player bets $1 on red, the probability of winning $1 is 18/38 and the probability of losing $1 is 20/38. Let X equal the number of successive $1 bets that a player makes before losing $5. One hundred observations of X were simulated on a computer, yielding the following data:

(a) Find the sample mean and sample standard deviation of these data.

(b) Construct a relative frequency histogram of the data, using about 10 classes. The classes do not need to be of the same length.

(d) In your opinion, does the median or sample mean give a better measure of the center of these data?

Chapter 22 – Accounting Change and Error Analysis Accounting Changes o (1) Change in Principal Go from one generally accepted accounting principal to another generally accepted accounting principal. Ex: Going from Lifo to Fifo 3 Approaches A) Report Changes Currently o This can lead to misstatement B) Report Change Retrospectively o Looking backwards (prepare prior years) C) Report Change Prospectively o Looking forward Ignore what happened in the past, move forward Report the change retrospectively is the most accepted approach. Recast/re-prepare financial statements using new principles last year and use the new one this year. Not being presented (one year statement) – Show cumulative effect Show on the statement of retained earnings as the opening balance If company is presenting year by year statements, then redo all the years with the new principle. o (2) Change in Estimate Accounting is full of estimates Ex: Bad Debt Normal part of financial statements By nature, estimates change Change in estimate – there is no looking back. Start using new estimate/new percentage. Use prospective (looking forward) o (3) Change in Reporting Entity A switch from one type of reporting entity to another. Ex: Consolidating financial statements Reporting method has changed o Cost Equity or Equity Cost Change all prior years being reported to new reporting entity. Change in principle that is inseparable from change in estimate – account for it as change in estimate. Depreciation 15 16 15 16 S/L S/L S/L S/L 0 0 0 0 10 yrs 5 yrs 2 yrs 1 yr Start using 5 years going forward Capitalize; not really an asset Change in estimate/principle – Change in estimate None of the above are “errors” Errors are for example using non-GAAP to GAAP or GAAP to non-GAAP Something worse than accounting changes. Errors o Errors in accounting o Correction on errors from prior years – Statement of R/E Change the R/E number Ex: Math mistake, mis-classification, oversight (forgot to record) Prior year adjustment o Happen this year – fix this year’s statements/entries as long as the year has not ended o *Tip: What happens to end inventory happens to income Example: 2015 2016 Sales 40 40 Beg Inv 10 10 Purch 15 15 Avail 25 25 End Inv (10) (12) COGS 15 13 G/P 25 27 Offsetting inventory – corrects itself over a period of time. o Ex: 2 years – End Inventory, the following year becomes beginning inventory. o Because it offsets you still need to account for change because the following year will have the wrong beginning inventory.