Question

The 2,000 accounts receivable of ABC Company have a total book value of $40,000. Bill Rotter, CPA, has selected and audited a sample of 100 accounts with a total book value of $1,950. The audited value of the 100 accounts in the sample is $1,875. Using the difference estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be: A) $37,500. B) $38,462. C) $38,500. D) $41,600.

Answer 1

38,500

Step-by-step explanation:

ABC COMPANY

The difference estimation technique formula will be:

(Book Value / Book Value Sample) - (Audited Value / Audited Value Sample) * Total Sample +- Population

Let plug in the above formula

[(1875 / 100) - (1950 / 100)] * 2,000 - 40,000

Hence:

18.75-19.5*2,000-40,000

0.75×2,000-40,000

=1,500 -40,000

=38,500

Therefore the accounts receivable balance would be $38,500