Project #53513 - Financial report accrual

Activity: Fundamental Toys Inc - Accrual

The financial reports for the current quarter are due. Bob has sent an email requesting your assistance

 

 

 

An email message:

 

As you know, the company has had a very profitable quarter, and management has decided to accrue a liability previously disclosed concerning a hazardous waste site cleanup. I need to provide financial accounting with an accrual amount for the quarter’s financial reporting.

Management has decided to accrue at the lower range of the 68% confidence interval and has asked me to provide the dollar amount. I’m giving you this assignment.

Here’s what you need to know:

Environmental Engineering has provided the following cleanup forecast with probabilities in parentheses (in thousands of dollars):

 

Low estimate                   $15,000 (0.20)

Most likely                           $20,000 (0.70)

High estimate                  $25,000 (0.10)

 

 

 

Here’s what I need from you:

Provide the accrual amount for the quarterly 10Q statement. Submit your analysis in my drop box by the date to be specified.

 

First, find the expected return - which some of you have done!

 

 

 

Next, using the variance information, find the standard deviation of the probability distribution.

The 68% confidence interval is one standard deviation around the mean.

1.    The expected return minus one standard deviation (low range, 68% Confidence Interval)

2.    The expected return plus one standard deviation (high range)

 I hope this will help you answer the question.  

Note: Please refer to Chapter 2 and Appendix C - Selected Equations.  Thank you.

Best regards,

Dr. Colvin

-------------

Here are the basic steps to solving descriptive word problem (s):

1.    Write down deliverables

2.    Write down the question(s)…should match up w/ deliverables

3.    Write down what is given

4.    Determine the type of problem

5.    Find the appropriate equation(s)…use the best equation!!!

6.    Solve the equation

7.    Answer the question(s).

8.    TRUST Your Work!!!

I will walk you through this process for Week 3, Activities #1 and #2.

Please use this process for the remainder of this class.  It might be useful in future classes.

Thank you!

 

Dr. Colvin

Subject Business
Due By (Pacific Time) 01/11/2015 12:00 am
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