Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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: 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 $2,300,000. 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 proflt ratlo and Income taxes rotlo to nearest four declmal ploces. Round other ratlos to nearest two declmal places. Round all other Intermedlate computatlons to the neorest whole volue. Enter your answers In thousands.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started