Question

INCOME STATEMENT PREPARATION

On June 30, 2019, Cathy Chen, a self-employed Certified Public Account (CPA) completed her first year in business. During the year, she billed $360,000 for her accounting services. She had two employees, a bookkeeper and a clerical assistant. In addition to her monthly salary of $8,000, she paid annual   salaries of $48,000 and $36,000 to the bookkeeper and assistant, respectively. Employment taxes and benefits cost for her and her employees totaled $34,600 for the year. Expenses for office supplies, including postage, totaled $10,400 for the year.   In addition, she spent $17,000 on tax deductible travel and entertainment associated with client visits and new business development.

Lease payments for the office space (a tax deductible expense) were $2,700 per month. Depreciation expense on the office furniture and fixtures were $15,600 for the year. She paid interest of $15,000 on the $120,000 borrowed to start the business. She paid and average tax rate 0f 30% during 2015.

1. Prepare and income statement for Cathy Chen, CPA, for the year ended June 30, 2019.
2. Evaluate her performance.

Answer 1