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please do the part C Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4.
please do the part C
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 $4,300,000. 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 Comparative income statement information for Uden Supply Company is presented in the below table 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.) Sales Cost of goods sold Gross profit Sales commissions Advertising Salaries Payroll taxes Employee benefits Rent Depreciation Supplies Utaties UDEN SUPPLY COMPANY Comparative Income Statements Years Ended December 20X1. 20X2, and 2003 (thousands) 20X1 Audited 20x2 Audited 20x3 Audited 20X4 Expected 14,700 15.200 15,700 s 16,200 10.140 10.500 10.860 11.630 4560 4,700 4840 4,670 1.030 1,060 1.100 1.130 294 300 310 319 1.161 1.202 1.243 1.284 204 217 230 243 187 200 213 226 80 81 82 83 80 81 82 83 06 47 18 49 41 42 43 Sales 14,700 10,140 4,560 1.030 294 1.161 204 15,200 10,500 4,700 1,060 300 15,700 $ 10,860 4,840 1,100 310 1,243 230 213 82 82 16,2001 11,530 4,670 1,130 319 1,284 243 226 1,202 217 200 187 80 81 83 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 80 81 46 83 49 47 48 43 41 42 55 56 34 54 32 450 901 203 698 33 468 914 44 57 35 516 594 104 480 919 207 712 206 708 490 c. Uden's 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.) Expected statement
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