Ch 4 Homework

Chapter 4 Homework Problems Answer questions 1 to 3 from the following information: Professor Jones has created a formula with which students can predict their grade on the final examination based on their total scores on the first two examinations. The prediction equation is Ŷ ' = 2 X + 30, where X is the total number of points the student has earned on the first two tests. The final examination has these characteristics: mean = 300 and standard deviation = 100. The correlation between total score on the first two tests and the final is .80. Kelly scored a total of 60 on the first two tests. 1. Predict Kelly’s score on the final examination. 2. What is the SEE for predicting the final examination from the first two tests? 3. How likely is it that Kelly will score greater than or equal to 114 on the final examination if Kelly had a total of 60 points on the first two tests? 4. Assume that a test had the following characteristics: mean of X = 50; mean of Y = 500; standard deviation of X = 10; standard deviation of Y = 100; r = .80. Calculate the standard error of estimate. 5. The line of best fit for predicting Y from X is defined as Ŷ ' = 10* X + 40. Jamie scored 40 on X . What is Jamie’s predicted score on Y ? 6. Assume that the SEE is 60 and that Jamie is predicted to score 440. How likely is it that Jamie’s actual score on Y will be greater than 500? Answer items 7 to 9 from the following information: The mean for VO 2 max is 50 ml/kg/min and the standard deviation is 10 ml/kg/min. Professor Mill wants to estimate VO 2 max from a field test of running a given distance for time. The coefficient of determination for the correlation between VO 2 max and running time is .84. Assume that his equation for predicting VO 2 max from running time is this: VO 2 max' = time in minutes × ( − 10) + 125. 7. Calculate Terry’s estimated VO 2 max' if Terry’s run time is exactly 10 minutes. 8. Calculate the error for predicting VO 2 max from running time. 9. How likely is it that Terry will have an actual VO 2 max less than or equal to 29 if Terry’s predicted running time is exactly 25 minutes and the SEE is 4 minutes? The answer is a probability (i.e., a number). Answer items 10 to 12 from the following information:

Ch 4 Homework Solutions 7.The cash method taxpayer is subject to the constructive receipt doctrine. Generally, the cash basis taxpayer does not recognize income until it is collected. Under the constructive receipt concept, when the taxpayer has earned the income and the customer has offered to pay, the taxpayer cannot defer its recognition by postponing the date when the income is collected. The constructive receipt doctrine is not relevant to accrual basis taxpayers, who must recognize income when the taxpayer has a right to receive it even though the income has not been collected. pp. 4-9 to 4-11 11. The taxpayer can defer income by using the cash method of accounting when the customers or clients pay subsequent to the taxpayer delivering the goods or performing the services (i.e., avoid paying taxes on receivables). p. 4-9 12. If Rex sells the car, he must pay the tax on the gain of $3,800 ($9,000 – $5,200). If Rex gives the automobile to his daughter and she sells it, she will be taxed on the gain of $3,800. Thus, the increase in value that is economically attributable to Rex will become his daughter’s income. If Rex is in a higher marginal tax bracket (probably the case), the family unit will generate tax savings by Rex’s daughter selling the car. Thus, gifts of appreciated property can be a useful tax planning concept. pp. 4-16 to 4-18 and 4-38 14. Tom must include in his gross income his share of the partnership’s income, regardless of whether the profits are actually distributed. Therefore, Tom must recognize as gross income from the partnership $120,000 ($300,000 × 40%) in 2010 and $320,000 ($800,000 × 40%) in 2011. pp. 4-18 and 4-19 16. The purpose of the alimony recapture rules is to prevent disguising a nondeductible property settlement as alimony. pp. 4-23 and 4-24 23. Betty’s tax return for 2010 will reflect a loss on the annuity contract in 2010 because she collected on the policy for only 12 years when she was expected to collect for 20 years. The deductible loss is computed as follows:

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