WFire,CPA Is Examining the Accounts Receivable (Which Were Recorded at $500,000)for

question 85

Essay

W.Fire,CPA is examining the accounts receivable (which were recorded at $500,000)for TBB,Inc.,using a monetary unit sampling application.Using a risk of incorrect acceptance of 5% and a tolerable misstatement of $50,000,Fire has determined a sample size of 100 items and found the following three misstatements a.What sampling interval did Fire use?
b.Based on the preceding information,calculate the (1)actual misstatement,(2)projected misstatement,(3)incremental allowance for sampling risk,and (4)basic allowance for sampling risk.
c.What is the upper limit on misstatement?
d.Based on the preceding information,what would Fire's conclusion be with respect to TBB's accounts receivable balance?

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Definitions:

Cut the Price

To reduce the selling price of a product or service.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good changes in response to a change in its price.

Close Substitutes

Products or services that can be used in place of one another with little difference in satisfaction for the consumer, leading to a high cross-elasticity of demand.

Supply

The total amount of a good or service that is available for purchase at any given price level.