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 company's line of credit for 20X4 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 20X4 for each of the income statement items. Note: 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. Answer is complete and correct. UDEN SUPPLY COMPANY Comparative Income Statements Years Ended December 20X1, 20X2, and 20X3 Sales Cost of goods sold Gross profit (Thousands) 20X1 20X2 Audited Audited 8,700 9,400 6,000 6,500 2,700 2,900 20X3 Audited 20X4 Expected Sales commissions 610 Advertising 175 Salaries 1,061 1,082 Payroll taxes 184 Employee benefits 167 Rent 60 Depreciation 60 Supplies 26 Utilities 21 Legal and accounting 34 Miscellaneous 12 Interest expense 210 Net income before taxes 80 Income taxes 18 ཙྩུ ༔ ༔ ༔ ༅ ༔ ༈ ཎྜ གླ སླུ ཆ གླ གླུ」 10,100 $ 10,800 7,000 3,100 7,701 3,099 710 756 190 202 216 1,103 1,124 192 199 207 174 181 188 61 62 63 63 66 69 30 32 22 23 24 40 43 13 14 15 228 240 276 150 230 86 33 50 14 Net income 62 117 180 $ 72 c. Uden's unaudited financial statements for the current year show a 31 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. Note: Enter your answers in thousands. Answer is complete but not entirely correct. Expected misstatement $ 22 ☑