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Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31,204. In planning the audit, Marilyn is

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Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31,204. In planning the audit, Marilyn is attempting to develop expectations for planning analytical procedures based on the financial information for prior years and her knowledge of the business and the industry, including these: 1. Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend in terms of actual dollar increases. 2. Based on her knowledge of industry trends, she believes that the gross profit percentage for 204 should be about 2 percent less than the percentage for 203. 3. Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 204 has been reduced by 5 percent from that in 203. 4. Based on her knowledge of economic conditions, she is aware that the effective interest rate on the company's line of credit for 204 was approximately 12 percent. The average outstanding balance of the line of credit is $3,600,000. This line of credit is the company's only interest-bearing debt. 5. Based on her discussions with management and her knowledge of the industry, she believes that the amount of other expenses should be consistent with the trends from prior years. Comparative income statement information for Uden Supply Company is presented in the below table. Required: b. Determine the expected amounts for 204 for each of the income statement items. (Round gross profit ratio and income taxes ratio to nearest four decimal places. Round other ratios to nearest two decimal places. Round all other intermediate computations to the nearest whole value. Enter your answers in thousands.) Comparative Income Statements Years Ended December 20X1, 20X2, and 20X3 (Thousands) \begin{tabular}{|l|r|r|r|r|} \hline Sales & 20X1 Audited & 20X2 Audited & 20X3 Audited & 20X4 Expected \\ \hline Cost of goods sold & 12,600 & 13,500 & 14,400 & $ \\ \hline Gross profit & 8,690 & 9,330 & 9,970 \\ \hline Sales commissions & 3,910 & 4,170 & 4,430 \\ \hline Advertising & 880 & 950 & 1,010 \\ \hline Salaries & 252 & 270 & 290 \\ \hline Payroll taxes & 1,126 & 1,160 & 1,194 \\ \hline Employee benefits & 197 & 203 & 209 \\ \hline Rent & 180 & 186 & 192 \\ \hline Depreciation & 73 & 77 & 81 \\ \hline Supplies & 73 & 77 & 81 \\ \hline Utilities & 39 & 43 & 47 \\ \hline Legal and accounting & 34 & 38 & 42 \\ \hline Miscellaneous & 47 & 51 & 55 \\ \hline Interest expense & 25 & 29 & 33 \\ \hline Net income before taxes & 366 & 384 & 396 \\ \hline Income taxes & 618 & 702 & 800 \\ \hline \end{tabular}

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