ACC Ch 9 Part 7 (MATH)

The 1,000 accounts receivable of Baker Company have a total book value of $30,000 (Average book value = $30). Wendy Duffo, CPA, has selected and audited a sample of 50 accounts with the following mean values: 1. Book value of $29.00 2. Audited value of $29.50. What is the estimated total audited value using mean-per-unit sampling?

$29,500. (AV * Sample) (29.50 * 1000)

The 1,000 accounts receivable of Baker Company have a total book value of $30,000 (Average book value = $30). Wendy Duffo, CPA, has selected and audited a sample of 50 accounts with the following mean values: 1. Book value of $29.00 2. Audited value of $29.50. What is the estimated total audited value using difference estimation sampling?

$30,500 (AV - BV) * Sample +- Total Population (29.50 - 29.00)= .50*1000= 500 500+ 30,000= 30,500 (Add because it is understated)

Population Size = 10,000 items Book value = $8,000,000 Tolerable misstatement = $300,000 Sample Size = 100 items. Average book value of sample items = $795 Allowance for sampling risk = $220,000 Projected misstatement = $100,000 overstatement The "high" end of the confidence interval around the projected misstatement is equal to an overstatement of:

$320,000 (Projected Misstatement +- Allowance for Sampling Risk) (100,000 + 220,000)

Population Size = 10,000 items Book value = $8,000,000 Tolerable misstatement = $300,000 Sample Size = 100 items. Average book value of sample items = $795 Allowance for sampling risk = $220,000 Projected misstatement = $100,000 overstatement The estimated total audited value of the population equals:

$7,900,000. (BV - Projected Misstatement) (8,000,000 - 100,000)

Population Size = 10,000 items Book value = $8,000,000 Tolerable misstatement = $300,000 Sample Size = 100 items. Average book value of sample items = $795 Allowance for sampling risk = $220,000 Projected misstatement = $100,000 overstatement The average audited value in the sample is equal to:

$785. (Projected Misstatement / size) = x Avg BV +- x = Avg Audited Value (100,000 / 10,000) = 10 $795 - 10 = 785 (Subtract because it is overstated)

The 4,000 accounts receivable of Miller Company have a total book value of $150,000. A CPA has selected and audited a sample of 100 accounts with a total book value of $3,700 and an audited value of $3,800. Using the mean-per-unit estimation technique, the estimated total audited value of the population is:

152,000 (BV / BV Sample)* Total Sample

The 4,000 accounts receivable of Miller Company have a total book value of $150,000. A CPA has selected and audited a sample of 100 accounts with a total book value of $3,700 and an audited value of $3,800. Using the difference estimation technique, estimated total audited value of the population is:

154,000 (AV / AV Sample - BV / BV Sample)* Total Sample +- Population (3800 / 100 - 3700 / 100) * 4000 + 150,000 (add because understated)

The 4,000 accounts receivable of Miller Company have a total book value of $150,000. A CPA has selected and audited a sample of 100 accounts with a total book value of $3,700 and an audited value of $3,800. Using the ratio estimation technique, the estimated total audited value of the population is:

154054.05 (BV / AV) * Total Population

The 2,000 accounts receivable of ABC Company have a total book value of $40,000. Bob Rotter, CPA, has selected and audited a sample of 100 accounts with a total book value of $1,950. The audited value of the 100 accounts in the sample is $1,875. Using the mean-per-unit estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be:

37,500 (AV / AV sample) * Total Sample (1875 / 100) * 2000

The 2,000 accounts receivable of ABC Company have a total book value of $40,000. Bob Rotter, CPA, has selected and audited a sample of 100 accounts with a total book value of $1,950. The audited value of the 100 accounts in the sample is $1,875. Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be:

38,461.53 (AV / BV) * Total Population (1875 / 1950) = .9615 * 40,000

The 2,000 accounts receivable of ABC Company have a total book value of $40,000. Bob Rotter, CPA, has selected and audited a sample of 100 accounts with a total book value of $1,950. The audited value of the 100 accounts in the sample is $1,875. Using the difference estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be

38,500 (BV / BV Sample) - (AV / AV Sample) * Total Sample +- Population [(1875 / 100) - (1950 / 100)] * 2000 - 40,000 (subtract because it's overstated)