Biltrite Bicycles' recorded additions to factory equipment increased approximately 20% from 2019 to 2020. The recorded additions for 2020 totaled $9,000,000. Although controls over factory equipment additions have been evaluated as effective in prior years, the financial statement audits have uncovered occasional instances in which items on vendor invoices that should have been expensed were capitalized. Since errors of this nature cause the factory equipment account to be overstated, you have been instructed to use probability-proportional-to-size (PPS) sampling to determine the extent to which such misstatements occurred during 2020. Your supervisor set the following sampling plan parameters. Risk of incorrect acceptance: 15% Tolerable misstatement: $450,000 (5% of recorded additions) Expected misstatement: $180,000 (2% of recorded additions) An Excel fle, Case Assignment 10 Solution, containing the three workpapers listed below is posted on Blackboard in the Information Textbook Chapter 10 Case Assignment 10 folder WP 11.3A Sample Size and Sampling Interval Information WP 11.3B. Calculation of Projected Misstatement WP 11.3C Calculation of Upper Misstatement Limit Download the Excel file and save it to an Excel file named "Your Name - Case Assignment 10 Solution Required: 1. Review the Sample Size and Sampling Interval Information on WP 11.3A Insert your name and the date you reviewed the workpaper 2. Finish the partially completed Calculation of Projected Misstatement on WP 11.38. Insert your name and the date you finished the workpaper 3. Prepare a Calculation of Upper Misstatement Limit in good form on WP 1130. Show all supporting calculations Insert your name and the date you finished the workpaper 4. Document your evaluation of the sampling results at the bottom of WP 11.3C. Include: a. Your statistical conclusion b. The audit decision you reached based on your quantitative sampling results, including the reason for your decision C D BIL TRITE BICYCLES, INC. - December 31, 2020 PPS Sampling Analysis of Factory Equipment Additions WP 11.3A Name: Date: Sample Size and Sampling Interval Information Recorded factory equipment additions $9,000,000 Risk of incorrect acceptance 1500% 9 Tolerable mistatement $450,000 (5% of recorded additions) 10 Expected misstatement $100,000 (2% of recorded additions) 11 Sample sue used 87 (rounded up from 864) 12 Sampling interval $103.000 (rounded down from $103.448) 12 14 15 16 17 18 19 20 21 22 23 24 BIL TRITE BICYCLES, INC. - December 31, 2020 PPS Sampling Analysis of Factory Equipment Additions WP 11.3B Name: Date: Tainting (BY-AV/BV Sampling Interval Projected Misstatement Invoice Number Vendor 8 372134 Laxey Machine Works, Lid 9 1779927 Gerald Equipment and Parts, the 20 3068498 Cradle Corporation 11 9873025 Johnson's Welding and Maching 1210224680 Ladow Parts and Reports 13 14 15 16 17 18 19 Calculation of Projected Misstatement Misstatement Book Value Audit Value (BV-AV $166,580 $152.000 $14520 52360 SO $2.360 500 530 590000 $2.530 $15570 $15 000 5570 $28.700 32 000 5790 $911990 5291 080 $20.770 Sample Sise and Pro Upper Mistament 2 BILTRITE BICYCLES, INC. - December 31, 2020 PPS Sampling Analysis of Factory Equipment Additions WP 11.3C Name: Date: 10 11 12 14 15 16 17 15 19 20 Biltrite Bicycles' recorded additions to factory equipment increased approximately 20% from 2019 to 2020. The recorded additions for 2020 totaled $9,000,000. Although controls over factory equipment additions have been evaluated as effective in prior years, the financial statement audits have uncovered occasional instances in which items on vendor invoices that should have been expensed were capitalized. Since errors of this nature cause the factory equipment account to be overstated, you have been instructed to use probability-proportional-to-size (PPS) sampling to determine the extent to which such misstatements occurred during 2020. Your supervisor set the following sampling plan parameters. Risk of incorrect acceptance: 15% Tolerable misstatement: $450,000 (5% of recorded additions) Expected misstatement: $180,000 (2% of recorded additions) An Excel fle, Case Assignment 10 Solution, containing the three workpapers listed below is posted on Blackboard in the Information Textbook Chapter 10 Case Assignment 10 folder WP 11.3A Sample Size and Sampling Interval Information WP 11.3B. Calculation of Projected Misstatement WP 11.3C Calculation of Upper Misstatement Limit Download the Excel file and save it to an Excel file named "Your Name - Case Assignment 10 Solution Required: 1. Review the Sample Size and Sampling Interval Information on WP 11.3A Insert your name and the date you reviewed the workpaper 2. Finish the partially completed Calculation of Projected Misstatement on WP 11.38. Insert your name and the date you finished the workpaper 3. Prepare a Calculation of Upper Misstatement Limit in good form on WP 1130. Show all supporting calculations Insert your name and the date you finished the workpaper 4. Document your evaluation of the sampling results at the bottom of WP 11.3C. Include: a. Your statistical conclusion b. The audit decision you reached based on your quantitative sampling results, including the reason for your decision C D BIL TRITE BICYCLES, INC. - December 31, 2020 PPS Sampling Analysis of Factory Equipment Additions WP 11.3A Name: Date: Sample Size and Sampling Interval Information Recorded factory equipment additions $9,000,000 Risk of incorrect acceptance 1500% 9 Tolerable mistatement $450,000 (5% of recorded additions) 10 Expected misstatement $100,000 (2% of recorded additions) 11 Sample sue used 87 (rounded up from 864) 12 Sampling interval $103.000 (rounded down from $103.448) 12 14 15 16 17 18 19 20 21 22 23 24 BIL TRITE BICYCLES, INC. - December 31, 2020 PPS Sampling Analysis of Factory Equipment Additions WP 11.3B Name: Date: Tainting (BY-AV/BV Sampling Interval Projected Misstatement Invoice Number Vendor 8 372134 Laxey Machine Works, Lid 9 1779927 Gerald Equipment and Parts, the 20 3068498 Cradle Corporation 11 9873025 Johnson's Welding and Maching 1210224680 Ladow Parts and Reports 13 14 15 16 17 18 19 Calculation of Projected Misstatement Misstatement Book Value Audit Value (BV-AV $166,580 $152.000 $14520 52360 SO $2.360 500 530 590000 $2.530 $15570 $15 000 5570 $28.700 32 000 5790 $911990 5291 080 $20.770 Sample Sise and Pro Upper Mistament 2 BILTRITE BICYCLES, INC. - December 31, 2020 PPS Sampling Analysis of Factory Equipment Additions WP 11.3C Name: Date: 10 11 12 14 15 16 17 15 19 20