The Accounting Department Reports That the Balance of Accounts Receivable

question 53

Multiple Choice

The accounting department reports that the balance of accounts receivable is $210,000.You are willing to accept that balance if audit sampling suggests it is within $15,000 of the actual balance.Using a classical variables sampling plan,you compute a 95% confidence interval of $208,000 to $225,000.You would therefore

• A) not be able to determine the acceptability of the receivable balance.
• B) accept the balance but with a lower level of confidence.
• C) take a larger sample before totally rejecting the balance and requiring adjustments.
• D) accept the $210,000 balance because the confidence interval is within the materiality limits.
• The upper bound of the confidence interval is not greater than $15,000 above the recorded value of the account receivable balance.

---

Definitions:

Equilibrium Position

In the indifference curve model, the combination of two goods at which a consumer maximizes his or her utility (reaches the highest attainable indifference curve), given a limited amount to spend (a budget constraint).

Economic Resources

The land, labor, capital, and entrepreneurial ability that are used to produce goods and services; the factors of production.

Marginal Costs

The extra expense generated from the production of an additional unit of a product or service.

R&D Costs

Expenses related to the research and development activities of a company, often aimed at discovering new products or improving existing products.