Income statement preparation

 Income statement preparation

P1. Income statement preparation. On December 31, 2009, Cathy Chen, a self-employed CPA, completed her first full 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, Ms. Chen paid annual salaries of $48,000 and $36,000 to both of these employees, respectively. Employee taxes and benefit costs for Ms. Chen and her employees totaled $34,600 for the year. Expenses for office supplies, including postage, totaled $10,400 for the year. In addition, Ms. Chen spent $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 deductable expense) were $2,700 per month. Depreciation expense on the office furniture and fixtures was $15,600 for the year. During the year, Ms. Chen paid interest of $15,000 on the $120,000 borrowed to start the business. She paid an average tax rate of 30% during 2009.

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a. Prepare an income statement for Cathy Chen, CPA for the year ended December 31, 2009.

b. Evaluate (in a sentence of two) her 2009 financial performance.

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