An Accounting Firm Has Been Hired by a Large Computer

question 33

True/False

An accounting firm has been hired by a large computer company to determine whether the proportion of accounts receivables with errors in one division (Division 1) exceeds that of the second division (Division 2). The managers believe that such a difference may exist because of the lax standards employed by the first division. To conduct the test, the accounting firm has selected random samples of accounts from each division with the following results. Based on this information and using a significance level equal to 0.05, the critical value from the standard normal table is z = 1.645.

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Definitions:

Cash Discount

A reduction in the invoice amount by the seller, granted to the buyer for early payment within a specified period.

Credit Cost Curve

The relationship between the cost of credit for a borrower and the default risk of the borrower, indicating how the cost of borrowing money increases with higher risk.