Ranger,CPA used nonstatistical sampling to examine the accounts receivable balances of Cowboy,Inc.He audited a sample of 150 items and found an audited value of $5,000 less than the recorded balance of $25,000.The entire account balance contained 2,000 items and had a total recorded value of $350,000.Using nonstatistical methods and assuming that Ranger used the ratio of audited value to recorded value to estimate the account balance,the estimated total account balance is
A)$345,000
B)$330,000
C)$295,000
D)$280,000

Question

Quizplus · Accepted Answer

Since Ranger used the ratio of audited value to recorded value to estimate the account balance, we can set up the proportion:

audited value / recorded value = audited sample amount / recorded sample amount

Solving for the audited value of the entire account balance:

audited value / $350,000 = ($25,000 - $5,000) / ($25,000)

audited value = $280,000

Therefore, the estimated total account balance is $280,000. Choice D is the correct answer.

Ranger,CPA Used Nonstatistical Sampling to Examine the Accounts Receivable Balances