Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4 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 Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend Based on her knowledge of industry trends, she believes that the gross profit percentage for 20X4 should be about 2 percent less than the percentage for 20X3 Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3 Based on a review of the general ledger, she determined that average depreciable assets have increased by 10 percent Purchases of equipment occurred relatively evenly throughout the year Based on her knowledge of economic conditions, she is aware that the effective interest rate on the companys line of credit for 20X4 was approximately 12 percent The average outstanding balance of the line of credit is $4,300,000 This line of credit is the companys only interest bearing debt Based on her discussions with management the advertising and sales commission percentages are expected to stay the same Based on 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 UDEN SUPPLY COMPANY Comparative Income Statements Years Ended December 20X1, 20X2, and 20X3 (Thousands) 20X1 Audited 20X2 Audited 20X3 Audited 20X4 Expected Sales 14,700 15,200 15,700 Cost of goods sold 10,140 10,500 10,860 Gross profit 4,560 4,700 4,840 Sales commissions 1,030 1,060 1,100 Advertising 294 300 310 Salaries 1,161 1,202 1,243 Payroll taxes 204 217 230 Employee benefits 187 200 213 Rent 80 81 82 Depreciation 80 81 82 Supplies 46 47 48 Utilities 41 42 43 Legal and accounting 54 55 56 Miscellaneous 32 33 34 Interest expense 450 468 480 Net income before taxes 901 914 919 Income taxes 203 206 207 Net income 698 708 712 Required b Determine the expected amounts for 20X4 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 ) UDEN SUPPLY COMPANY Comparative Income Statements Years Ended December 20X4 (Thousands) Sales Cost of goods sold Gross profit Sales commissions Advertising Salaries Payroll taxes Employee benefits Rent Depreciation Supplies Utilities Legal and accounting Miscellaneous Interest expense Net income before taxes Income taxes Net income $ c Udens unaudited financial statements for the current year show a 30 83 percent gross profit rate Assuming that this represents a misstatement from the amount that you developed as an expectation, calculate the estimated effect of this misstatement on net income before taxes for 20X4 (Enter your answers in thousands )

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Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4. In planning the audit, Marilyn

Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4. 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:

Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend.
Based on her knowledge of industry trends, she believes that the gross profit percentage for 20X4 should be about 2 percent less than the percentage for 20X3.
Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3.
Based on a review of the general ledger, she determined that average depreciable assets have increased by 10 percent. Purchases of equipment occurred relatively evenly throughout the year.
Based on her knowledge of economic conditions, she is aware that the effective interest rate on the companys line of credit for 20X4 was approximately 12 percent. The average outstanding balance of the line of credit is $4,300,000. This line of credit is the companys only interest-bearing debt.
Based on her discussions with management the advertising and sales commission percentages are expected to stay the same. Based on 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.

UDEN SUPPLY COMPANY
Comparative Income Statements
Years Ended December 20X1, 20X2, and 20X3
(Thousands)
	20X1 Audited	20X2 Audited	20X3 Audited	20X4 Expected
Sales	14,700	15,200	15,700
Cost of goods sold	10,140	10,500	10,860
Gross profit	4,560	4,700	4,840
Sales commissions	1,030	1,060	1,100
Advertising	294	300	310
Salaries	1,161	1,202	1,243
Payroll taxes	204	217	230
Employee benefits	187	200	213
Rent	80	81	82
Depreciation	80	81	82
Supplies	46	47	48
Utilities	41	42	43
Legal and accounting	54	55	56
Miscellaneous	32	33	34
Interest expense	450	468	480
Net income before taxes	901	914	919
Income taxes	203	206	207
Net income	698	708	712

Required:

b. Determine the expected amounts for 20X4 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.)

UDEN SUPPLY COMPANY
Comparative Income Statements
Years Ended December 20X4
(Thousands)
Sales
Cost of goods sold
Gross profit
Sales commissions
Advertising
Salaries
Payroll taxes
Employee benefits
Rent
Depreciation
Supplies
Utilities
Legal and accounting
Miscellaneous
Interest expense
Net income before taxes
Income taxes
Net income	$

c. Udens unaudited financial statements for the current year show a 30.83 percent gross profit rate. Assuming that this represents a misstatement from the amount that you developed as an expectation, calculate the estimated effect of this misstatement on net income before taxes for 20X4. (Enter your answers in thousands.)