Perform the auditor technique of reperformance

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Reference no: EM133659498

Question: At December 31, 2025, ACCY Ltd has $5,890,000 (management's value) in a liability account called "Reserve for Returns" with a notation stating "at the time of sale, the company provides a reserve equal to the gross profit on a projected merchandise returns, based on the prior returns experience". The entity has indicated that returns for sales that are six months old are negligible and gross profit percentage for the year is 42.5 percent. The entity has also provided the following information on sales for the last six months of the year. Month Monthly Sales ($000s) Historic Return Rate July 73,300 0.004 August 82,800 0.006 September 93,500 0.010 October 110,200 0.015 November 158,200 0.025 December 202,500 0.032 Using the information, perform the auditor technique of reperformance and calculate the expected reserve for returns account. What is the variance (subtract your result from management value)?

Reference no: EM133659498

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