You are concerned only about overstatements of owner's equity. Set performance materiality for the three relevant accounts such that the preliminary judgment about materiality does not exceed $5,000. Justify your answer.

Cash $10,000 Fixed Assets $60,000 Total Assets $70,000

Long-term loans $30,000 M. Johnson, proprietor $40,000 Total liabilities and owner's equity $70,000

This problem is Review Questions 8-22 from the 16th edition of Auditing and Assurance Services An Integrated Approach