Question

The 4,000 accounts receivable of Miller Company have a total book value of $150,000. A CPA has selected and audited a sample of 100 accounts with a total book value of $3,700 and an audited value of $3,800. Using the difference estimation technique, estimated total audited value of the population is:________
a. $150,000.
b. $152,000.
c. $154,000.
d. $154,054.

Answer 1

Answer:

c. $154,000.

Explanation:

According to the difference value technique, the average difference between audited value and book value for the sample should be replicated for the whole population of 4,000 accounts. The average difference per account is:

$D=\frac{\ 3,800-\ 3,700}{100}\\D=\ 1$

This means that the audited value is $1 greater than the book value for each account, assuming 4,000 accounts with a book value of $150,000, the audited value is:

$A = \ 150,000+\ 1*4,000\\A=\ 154,000$

Estimated total audited value of the population is: c. $154,000.