You are evaluating audit results for assets in the audit of JohnsonsJohnsons Manufacturing. You set the preliminary judgment about materiality at $ 90 comma 000$90,000. The account balances, performance materiality, and estimated overstatements in the accounts are shown next.

Requirements

a. Assume you tested inventory amounts totaling $ 1 comma 100 comma 000$1,100,000 and found $ 38 comma 500$38,500 in overstatements. Ignoring sampling risk, what is your estimate of the total misstatement in inventory?

b. Based on the audit of the assets accounts and ignoring other accounts, are the overall financial statements acceptable? Explain.

c. What do you believe the auditor should do in the circumstances?

Requirement a. Assume you tested inventory amounts totaling $ 1 comma 100 comma 000$1,100,000 and found $ 38 comma 500$38,500 in overstatements. Ignoring sampling risk, what is your estimate of the total misstatement in inventory?

(Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.)

Account Performance Estimate of Total Account Balance Materiality Overstatements

Cash $60,000 $6,000 $5,000

Accounts receivable 1,600,000 80,000 28,000

Inventory 2,900,000 58,000 ?

Other assets 290,000 20,300 16,300

Total $4,850,000 $164,300 ?