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: 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 20x4 should be about 2 percent less than the percentage for 20x3. 3. 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. 4. 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. 5. Based on her knowledge of economic conditions, she is aware that the effective interest rate on the company's line of credit for 20x4 was approximately 12 percent. The average outstanding balance of the line of credit is $4,400,000. This line of credit is the company's only interest-bearing debt. 6. 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. 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.) 20x4 Expected $ 16,800 UDEN SUPPLY COMPANY Comparative Income Statements Years Ended December 20X1, 20x2, and 20X3 (Thousands) 20X1 Audited 20X2 Audited 20X3 Audited 15,000 15,600 16,200 10,350 10,770 11,210 4,650 4,830 4,990 1,050 1,090 1,130 300 310 320 1,166 1,208 1,250 205 219 233 16,800 188 202 216 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 81 85 83 83 81 85 47 49 51 44 46 42 55 57 59 35 33 462 37 492 480 940 970 986 212 218 222 Net income 728 752 764 $ 0 c. Uden's unaudited financial statements for the current year show a 30.80 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.) Expected misstatement