Materiality and Tolerable Misstatement

using figure 8-12. Household,inc.,page 341

using the materiality worksheet handout

calculate materiality for the ensuing audit

ETERS / MATERIALITY DECISIONS AND PERFORMING ANALYTICAL PROCEDURES 1391 Figure 8-12 Household, Inc. Summary Financial Statements ($ 000 Omitted) Income Statement 20x6 20x5 $ 3,513 $ 2,622 Sales Cost of sales Gross proft Selling general and administrative expenses Operating income Other income and expense Pretax income Income tax expense Net income $3,413 $ 2,475 $ 938 $ 781 $ 157 $ (14) $ 143 Balance Sheet Cash and cash equivalents Accounts receivable Inventories Current assets $ 208 $ 89 $ 1,183 $1,480 $ 190 $ 73 $ 1,179 $ 1,442 Property, plant and equipment Goodwill Total assets $ 630 $ 96 $ 649 $ 88 $ 2,179 $ 2,206 Accounts payable Accrued expenses Taxes, including income taxes Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total equity Total liabilities and equity $ 565 $ 401 $ 121 $ 1,087 $ 150 $ 1,237 $ 661 $ 308 $ 969 $ 2,206 $ 638 $ 376 $ 93 $ 1,107 $ 152 $ 1,259 $ 661 $ 259 $ 920 $ 2,179 Summary Cash Flow Information Cash flow from operations Cash flow from investing activities Cash flow from financing activities Change in cash $ 127 $ (107) $ (2) $ 18 $ 175 $ (90) $ 10 $ 95 ETERS / MATERIALITY DECISIONS AND PERFORMING ANALYTICAL PROCEDURES 1391 Figure 8-12 Household, Inc. Summary Financial Statements ($ 000 Omitted) Income Statement 20x6 20x5 $ 3,513 $ 2,622 Sales Cost of sales Gross proft Selling general and administrative expenses Operating income Other income and expense Pretax income Income tax expense Net income $3,413 $ 2,475 $ 938 $ 781 $ 157 $ (14) $ 143 Balance Sheet Cash and cash equivalents Accounts receivable Inventories Current assets $ 208 $ 89 $ 1,183 $1,480 $ 190 $ 73 $ 1,179 $ 1,442 Property, plant and equipment Goodwill Total assets $ 630 $ 96 $ 649 $ 88 $ 2,179 $ 2,206 Accounts payable Accrued expenses Taxes, including income taxes Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total equity Total liabilities and equity $ 565 $ 401 $ 121 $ 1,087 $ 150 $ 1,237 $ 661 $ 308 $ 969 $ 2,206 $ 638 $ 376 $ 93 $ 1,107 $ 152 $ 1,259 $ 661 $ 259 $ 920 $ 2,179 Summary Cash Flow Information Cash flow from operations Cash flow from investing activities Cash flow from financing activities Change in cash $ 127 $ (107) $ (2) $ 18 $ 175 $ (90) $ 10 $ 95