The accounting firm of Johnson and Johnson has decided to design a nonstatistical sample to examine the accounts receivable balance of Francisco Fragrances, Inc., at October 31. As of October 31, there were 1,500 accounts receivable accounts with a balance of $5.5 million. The accounts receivable population can be segregated into the following strata: Number and Size
of Accounts
Book Value
of Stratum
10 accounts >
$ 50,000
$ 750,000
440 accounts >
$ 5,000
3,000,000
1,050 accounts <
$ 5,000
1,750,000
Jonathan L. Gren, senior-in-charge of the audit, has made the following decisions:.
1. Based on the results of the tests of controls and risk assessment procedures, a low assessment is made for the risk of material misstatement.2. The desired confidence level is moderate.3. The tolerable misstatement allocated to accounts receivable is $155,000, and the expected misstatement is $55,000.4. All the balances greater than $50,000 will be auditedRequired-Using the nonstatistical sampling formula included in the textbook, compute the suggested sample size for this test using Table 9-5.Gren confirmed the accounts receivable accounts selected and noted the following results (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.):StratumBook Value of StratumBook Value of SampleAudit Value of SampleAmount of Overstatement>$
50,000$ 750,000$ 750,000$ 746,500$ 3,500>$5,0003,000,000910,000894, 75015,250>$5,0001,750,00070,0006 8,4501,550Using ratio projection, what is the total projected misstatement? What conclusion should Gren make concerning the accounts receivable balance?