46. The 3000 accounts receivable of DEF Company have a total book value of $60,0

Question

46. The 3000 accounts receivable of DEF 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 $2,100. Using the difference estimation technique, Smith has properly estimated a projected misstatement of an overstatement of $6,000 for the entire population. The audited value of Smith's sample is: A. $1,700 B. $1,800 C. $1,900 D. $2,300

47. The 3000 accounts receivable of DEF 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 $2,100. Using the difference estimation technique, Smith has properly estimated a projected misstatement of a $9,000 overstatement for the entire population. The estimated total audited value of the population is: A. $51,000 B. $58,000 C. $60,000 D. $69,000

48. The 4000 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

Explanation / Answer

Answer

46.C.$1900

For a book balance of 60000 in 3000 accounts, the auditor has estimated the overstatement as 6000. i.e. for each account, the overstatement is 6000/3000= 2 dollars and for 100 accounts, with total book balance of 2100, the overestimation is 200.

This means the audited value is [the book value of] 2100 minus [the overestimation of] 200= 1900.

48.A.$51000

Since the accounts receivable balance are overstated, the adjusted accounts receivable balance can be found by deducting the overstatement from original accounts receivable balance

Estimated total audited value = 60000 - 9000 = 51000

49.A.$1300

For a book balance of 60000 in 4000 accounts, the auditor has estimated the overstatement as 4000. i.e. for each account, the overstatement is 8000/4000= 2 dollars and for 100 accounts, with total book balance of 1600, the overestimation is 300.

This means the audited value is [the book value of] 1600 minus [the overestimation of] 300= 1300.

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