Question

Income statement preparation   On December​ 31,

20192019​,

Cathy​ Chen, a​ self-employed certified public accountant​ (CPA), completed her first full year in business. During the​ year, she charged her clients

$ 366 comma 000$366,000

for her accounting services. She had two​ employees, a bookkeeper and a clerical assistant. In addition to her monthly salary of

$ 8 comma 050$8,050​,

Ms. Chen paid annual salaries of

$ 48 comma 500$48,500

and

$ 35 comma 800$35,800

to the bookkeeper and the clerical​ assistant, respectively. Employment taxes and benefit costs for Ms. Chen and her employees totaled

$ 34 comma 300$34,300

for the year. Expenses for office​ supplies, including​ postage, totaled  

$ 10 comma 900$10,900

for the year. In​ addition, Ms. Chen spent

$ 17 comma 000$17,000

during the year on​ tax-deductible travel and entertainment associated with client visits and new business development. Lease payments for the office space rented​ (a tax-deductible​ expense) were

$ 2 comma 730$2,730

per month. Depreciation expense on the office furniture and fixtures was

$ 15 comma 200$15,200

for the year. During the​ year, Ms. Chen paid interest of

$ 14 comma 600$14,600

on the

$ 121 comma 000$121,000

borrowed to start the business. She paid an average tax rate of

30 %30%

during

20192019.

a. Prepare an income statement for Cathy​ Chen, CPA, for the year ended December​ 31,

20192019.

b. Evaluate her

20192019

financial performance.

a. Prepare an income statement for Cathy​ Chen, CPA, for the year ended December​ 31,

20192019.

Complete the fragment of the income statement for Cathy Chen​ below:  ​(Select the correct account from the​ drop-down menu and round to the nearest​ dollar.)

Cathy Chen, CPA
Income Statement
for the Year Ended December 31, 2019
Sales revenue			$	366000

Complete the fragment of the income statement for Cathy Chen​ below:  ​(Select the correct account from the​ drop-down menu and round to the nearest​ dollar.)

Less: Operating expenses

Salaries

$

183000

Total operating expense

$

Operating profits (EBIT)

$

Complete the fragment of the income statement for Cathy Chen​ below:  ​(Select the correct account from the​ drop-down menu and round to the nearest​ dollar.)

Net profits before taxes			$

Complete the fragment of the income statement for Cathy Chen​ below:  ​(Select the correct account from the​ drop-down menu and round to the nearest​ dollar.)

Net profits after taxes			$

b. Evaluate her

20192019015

financial performance.  ​(Select the best answer​ below.)

A.In her first year of​ business, Cathy Chen covered all her operating expenses and earned a net profit of

$ 60 comma 340$60,340

on revenues of

$ 366 comma 000$366,000.

B.In her first year of​ business, Cathy Chen covered all her operating expenses and earned a net profit of

$ 42 comma 238$42,238

on revenues of

$ 366 comma 000$366,000.

C.In her first year of​ business, Cathy Chen did not cover all her operating​ expenses, which resulted in a net loss of

$ 60 comma 340$60,340

on revenues of

$ 366 comma 000$366,000.

D.In her first year of​ business, Cathy Chen did not cover all her operating​ expenses, which resulted in a net loss of

$ 42 comma 238$42,238

on revenues of

$ 366 comma 000$366,000.

Answer 1

Income Statement of Cathy Chen for the year ended Dec 2019	Amount ($)	Amount ($)
Service Charges ( Income )		366000
Operating Expenses
Salaries
Self Paid (8050*12)	96600
Book keeper	48500
Clerical Assistant	35800
Employment Taxes and benefits	34300
Office Expenses	10900
Travelling Expenses ( Allowable)	17000
Lease payment (2730*12)	32760
Depreciation Expenses	15200	291060
Profit Befor Int and Tax		74940
Finance Cost		14600
PBT ( Net Profit)		60340
Tax @30%		18102
Profit After Tax		42238

All the Sub parts of the question are identifiable from the working above