You are responsible for calculating Materiality for your client Lightning, Inc. using the layered method. You determine that the most appropriate base to use is Total Revenues, which are $8,750,000 for the current year under audit. The overall assessed Audit Risk for this client is High.

Using the table below, calculate Materiality. ROUND YOUR ANSWER TO THE NEAREST WHOLE DOLLAR.

Materiality (ML) First Next Next Next Balance Total Assets or Revenue $1 million 2.0% $2 million 1.8% $4 million 1.5% $6 million 1.0% 0.8% Net Assets (Equity) $500,000 5.0% $1 million 4.8% $2 million 4.5% $4 million 4.0% 3.8% Income Before Taxes $250,000 7.0% $500,000 6.8% $1 million 6.5% $2 million 6.0% 5.8% EBITDA $500,000 $1 million $2 million $4 million 4.0% 3.8% 3.5% 3.0% 2.8% Tolerable Misstatement (TM /Performance Materiality (PM) Overall Audit Risk TM/PM factor 50% of ML High Medium Low 70% of ML 80% of ML