The 4,000 accounts receivable of GHI Company have a total book value of $60,000.Bob Smith,CPA,has selected and audited a sample of 100 accounts with a total book value of $1,600.Using the mean-per-unit estimation technique,Smith has properly estimated a projected misstatement of a $8,000 overstatement for the entire population.The audited value of Smith's sample is:
A)$1,300
B)$1,400
C)$1,600
D)$1,800

Question

Quizplus · Accepted Answer

The audited value of Smith's sample can be calculated by subtracting the projected misstatement for the entire population from the total book value and then applying the mean-per-unit estimation technique. The calculation is as follows: $60,000 (total book value) - $8,000 (projected misstatement) = $52,000 (corrected total book value). Since the sample represents 1/40th of the total population (100 out of 4,000 accounts), the audited value of the sample is 1/40th of the corrected total book value: $52,000 / 40 = $1,300.

The 4,000 Accounts Receivable of GHI Company Have a Total