Pujols,CPA,performed a nonstatistical sampling plan to examine the inventory balances of Wieserbud Brewing,Inc.and estimated the account balance based on the ratio of audited value to recorded balances.He audited 120 items from a sample and found an audited value of $24,600.The sample had a recorded balance of $30,000.If the entire inventory contained 2,400 items and the total recorded balance of the inventory was $480,000,the estimated account balance using nonstatistical methods is:
A)$393,600.
B)$474,500.
C)$480,000.
D)$500,000.

Question

Quizplus · Accepted Answer

Pujols estimated the account balance based on the ratio of audited value to recorded balances. So, he found that the audited value of $24,600 is 82% ($24,600/$30,000) of the recorded balance of $30,000 in the sample. Thus, the estimated value of the entire inventory will also be 82% of the recorded balance of the inventory.

Recorded balance of the inventory = $480,000
So, the estimated account balance using nonstatistical methods can be calculated as:
Estimated account balance = Recorded balance of the inventory × Ratio of audited value to recorded balances
Estimated account balance = $480,000 × 82%
Estimated account balance = $393,600

Therefore, the best choice is A) $393,600 because it is the estimated account balance using the nonstatistical method based on Pujols' sample.

Pujols,CPA,performed a Nonstatistical Sampling Plan to Examine the Inventory Balances