SCENARIO 10-15
the Table Below Presents the Summary Statistics for the Starting

question 119

Short Answer

SCENARIO 10-15
The table below presents the summary statistics for the starting annual salaries (in thousands of
dollars) for individuals entering the public accounting and financial planning professions. Sample I (public accounting): $\bar { X } _ { 1 } = 60.35 , S _ { 1 } = 3.25 , n _ { 1 } = 12$
Sample II (financial planning): $\bar { X } _ { 2 } = 58.20 , S _ { 2 } = 2.48 , n _ { 2 } = 14$ Test whether the mean starting annual salaries for individuals entering the public accounting
professions is higher than that of financial planning assuming that the two population variances are
the same.
-Referring to Scenario 10-15, state the null and alternative hypotheses for testing whether there is evidence of a difference in the variances of the starting annual salaries. a) $H _ { 0 } : \sigma _ { 1 } ^ { 2 } - \sigma _ { 2 } ^ { 2 } \geq 0$ versus $H _ { 1 } : \sigma _ { 1 } ^ { 2 } - \sigma _ { 2 } ^ { 2 } < 0$
b) $H _ { 0 } : \sigma _ { 1 } ^ { 2 } - \sigma _ { 2 } ^ { 2 } \leq 0$ versus $H _ { 1 } : \sigma _ { 1 } ^ { 2 } - \sigma _ { 2 } ^ { 2 } > 0$
c) $H _ { 0 } : \sigma _ { 1 } ^ { 2 } - \sigma _ { 2 } ^ { 2 } = 0$ versus $H _ { 1 } : \sigma _ { 1 } ^ { 2 } - \sigma _ { 2 } ^ { 2 } \neq 0$
d) $H _ { 0 } : \sigma _ { 1 } ^ { 2 } - \sigma _ { 2 } ^ { 2 } \neq 0$ versus $H _ { 1 } : \sigma _ { 1 } ^ { 2 } - \sigma _ { 2 } ^ { 2 } = 0$

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Definitions:

Significant Influence

Significant influence is a term used in accounting to describe the power to participate in the financial and operating policy decisions of another company, without having full control or majority ownership.

Fair Value Method

This method involves estimating the price of an asset or liability in an orderly transaction between market participants at the measurement date.

Amortized Cost Method

An accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time, essentially reflecting the cost of the asset over its useful life or payback period.

Equity Method

An accounting technique used by companies to assess the profits earned through their investments in other companies.