Auditing & Assurance Services (Auditing and Assurance Services)
7th Edition
ISBN: 9781259573286
Author: Timothy J Louwers, Allen Blay, David Sinason Associate Professor, Jerry R Strawser, Jay C. Thibodeau Associate Professor
Publisher: McGraw-Hill Education
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Chapter 12, Problem 63EP
To determine
Draft audit report for the given case.
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compared to the individual risks of constituting assets.
Question 5 (6 marks)
The common shares of Almond Beach Inc, have a beta of 0.75, offer a
return of 9%, and have an historical standard deviation of return of
17%. Alternatively, the common shares of Palm Beach Inc. have a beta
of 1.25, offer a return of 10%, and have an historical standard
deviation of return of 13%. Both firms have a marginal tax rate of
37%. The risk-free rate of return is 3% and the expected rate of
return on the market portfolio is 9½%.
1. Which company would a well-diversified investor prefer to invest
in? Explain why and show all calculations.
2. Which company Would an investor who can invest in the shares of
only one firm prefer to invest in? Explain why.
RELEASED BY THE CI, MGMT2023, MARCH 2, 2025 5
Use the following template to organize and present your results:
Theoretical CAPM Actual offered
prediction for
expected return
(%)
return (%)
Standard
deviation of
return (%)
Beta
Almond Beach Inc.
Palm Beach…
provide correct answer
Please solve. The screen print is kind of split. Please look carefully.
Chapter 12 Solutions
Auditing & Assurance Services (Auditing and Assurance Services)
Ch. 12 - Prob. 1RCCh. 12 - Prob. 2RCCh. 12 - Prob. 3RCCh. 12 - Prob. 4RCCh. 12 - Prob. 5RCCh. 12 - Prob. 6RCCh. 12 - Prob. 7RCCh. 12 - Prob. 8RCCh. 12 - Prob. 9RCCh. 12 - Prob. 10RC
Ch. 12 - Prob. 11RCCh. 12 - Prob. 12RCCh. 12 - Prob. 13RCCh. 12 - Prob. 14RCCh. 12 - Prob. 15RCCh. 12 - Prob. 17RCCh. 12 - Prob. 18RCCh. 12 - Prob. 19RCCh. 12 - Prob. 20RCCh. 12 - Prob. 21RCCh. 12 - Prob. 22RCCh. 12 - Prob. 23RCCh. 12 - Prob. 24RCCh. 12 - Prob. 25RCCh. 12 - Prob. 26RCCh. 12 - Prob. 27RCCh. 12 - Prob. 28RCCh. 12 - Prob. 29RCCh. 12 - Prob. 30MCQCh. 12 - Prob. 31MCQCh. 12 - Prob. 32MCQCh. 12 - Prob. 33MCQCh. 12 - Prob. 34MCQCh. 12 - Prob. 35MCQCh. 12 - Prob. 36MCQCh. 12 - Prob. 37MCQCh. 12 - Prob. 38MCQCh. 12 - Prob. 39MCQCh. 12 - Prob. 40MCQCh. 12 - Prob. 41MCQCh. 12 - Prob. 42MCQCh. 12 - Prob. 43MCQCh. 12 - Prob. 44MCQCh. 12 - Prob. 45EPCh. 12 - Prob. 46EPCh. 12 - Prob. 47EPCh. 12 - Prob. 48EPCh. 12 - Scope Limitations. D. Brady has been engaged as...Ch. 12 - Prob. 50EPCh. 12 - Various Reporting Situations. Assume that the...Ch. 12 - Prob. 52EPCh. 12 - Prob. 53EPCh. 12 - Prob. 54EPCh. 12 - Prob. 55EPCh. 12 - Prob. 56EPCh. 12 - Prob. 57EPCh. 12 - Prob. 58EPCh. 12 - Audit Report Deficiencies: Accounting Change and...Ch. 12 - Prob. 61EPCh. 12 - Prob. 62EPCh. 12 - Prob. 63EPCh. 12 - Prob. 64EPCh. 12 - Prob. 65EPCh. 12 - Prob. 66EPCh. 12 - Prob. 67EP
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- Coronado Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi- purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours x (54,000+10,200)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the predetermined overhead rate is $16.26 or ($1,566,090 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The company's managers identified six activity cost pools and related…arrow_forwardCoronado Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi- purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours x (54,000+ 10,200)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the predetermined overhead rate is $16.26 or ($1,566,090 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The company's managers identified six activity cost pools and related…arrow_forwardThe completed Payroll Register for the February and March biweekly pay periods is provided, assuming benefits went into effect as anticipated. Required: Using the payroll registers, complete the General Journal entries as follows: February 10 Journalize the employee pay. February 10 Journalize the employer payroll tax for the February 10 pay period. Use 5.4 percent SUTA and 0.6 percent FUTA. No employees will exceed the FUTA or SUTA wage base. February 14 Issue the employee pay. February 24 Journalize the employee pay. February 24 Journalize the employer payroll tax for the February 24 pay period. Use 5.4 percent SUTA and 0.6 percent FUTA. No employee will exceed the FUTA or SUTA wage base. February 28 Issue the employee pay. February 28 Issue payment for the payroll liabilities. March 10 Journalize the employee pay. March 10 Journalize the employer payroll tax for the March 10 pay period. Use 5.4 percent SUTA and 0.6 percent FUTA. No employees will exceed the FUTA or SUTA wage base.…arrow_forward
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