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 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 $2,400,000. This line of credit is the companys 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 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.)

C. Udens unaudited financial statements for the current year show a 30.75 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 = ____

20X3 Audited 20X4 Expected Sales (Thousands) 20X1 Audited 20X2 Audited 9,000 9,800 6,210 6,770 2,790 3,030 630 690 Cost of goods sold Gross profit Sales commissions 10,600 7,340 3,260 0 740 180 200 210 Advertising Salaries 1,066 1,110 1,088 190 185 195 Payroll taxes Employee benefits Rent 168 172 176 61 63 65 61 65 69 27 30 33 Depreciation Supplies Utilities Legal and accounting Miscellaneous 22 24 26 35 39 43 13 15 17 222 240 Interest expense Net income before taxes 252 324 120 214 Income taxes 27 48 73 Net income 93 166 251 $ 0