Green CPA audited the inventory of ABC Company on a sample basis. Green audited a sample of 120 items and found a net overstatement of $600. The audited sample had a recorded value of $12,000. The entire inventory contained 2,400 items with a total book value of $280,000. The projected likely overstatement using the dollar unit sampling method is ________.
A) $12,000
B) $14,000
C) $48,000
D) $56,000

Question

Quizplus · Accepted Answer

The projected overstatement is calculated by finding the ratio of the overstatement in the sample to the sample's recorded value and then applying this ratio to the entire inventory's book value. ($600 / $12,000) * $280,000 = $14,000.

Green CPA Audited the Inventory of ABC Company on a Sample