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:

1.	Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend.

2.	Based on her knowledge of industry trends, she believes that the gross profit for 20X4 should be about 3 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 4 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.

5.	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 10 percent. The average outstanding balance of the line of credit is $2,350,000. This line of credit is the companys 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.

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	$ 8,000	$ 8,900	$ 9,800
Cost of goods sold	5,200	6,230	6,958
Gross profit	2,800	2,670	2,842
Sales commissions	620	445	490
Advertising	180	89	98
Salaries	1,066	1,082	1,098
Payroll taxes	186	190	194
Employee benefits	170	173	176
Rent	62	64	66
Depreciation	63	67	71
Supplies	28	31	34
Utilities	23	25	27
Legal and accounting	37	41	45
Miscellaneous	13	15	17
Interest expense	215	233	245
Net income before taxes	137	215	281
Income taxes	31	47	61
Net income	$ 106	$ 168	$ 220

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.)

(This is what I have so far, but I don't think this is right, I'm not sure what numbers to use for some of the calculations)

c.

Udens unaudited financial statements for the current year show a 30 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. (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 $ 10,700 Cost of goods sold 7,943 Gross profit 2,757 Sales commissions 360 Advertising 2,140 Salaries 1,114 Payroll taxes Employee benefits 179 Rent 68 Depreciation 75 Supplies 37 Utilities 29 Legal and accounting 49 Miscellaneous 19 Interest expense Net income before taxes (1,313) Income taxes Net income $ (1,313)