Based on past experience with a client, an auditor determined performance materiality for fixed assets should...
Based on past experience with a client, an auditor determined performance materiality for fixed assets should be calculated at 1/4 of total materiality (5% of total gross fixed assets). Calculate performance materiality based on the following:
|
Fixed assets (gross) at 1/1/2017 |
$1,000,000 |
|
Capital expenditures |
250,000 |
|
Dispositions |
200,000 |
|
Accumulated depreciation at 1/1/2017 |
400,000 |
|
Accumulated depreciation at 12/31/2017 |
370,000 |
$8,500
$7,500
$15,625
$13,125
Homework Answers
Answer: $8,500
Explanation
Performance materiality = (Fixed assets (gross) + Capital expenditures - Dispositions - Accumulated depreciation at 12/31/2017)
x 1/4 x 5%
= ($1,000,000 + 250,000 - 200,000 - 370,000) x 1/4 x 5%
= $ 680,000 x 1/4 x 5%
= $8,500
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