Question

Income statement preparation On December 31, 2019, Cathy Chen, a self-employed certified public accountant (CPA), completed her first full year in business. During the year, she charged her clients $361,000 for her accounting services. She had two employees, a bookkeeper and a clerical assistant. In addition to her monthly salary of $7,990, Ms. Chen paid annual salaries of $48,200 and $36,200 to the bookkeeper and the clerical assistant, respectively. Employment taxes and benefit costs for Ms. Chen and her employees totaled $34,200 for the year. Expenses for office supplies, including postage, totaled $10,800 for the year. In addition, Ms. Chen spent $16,600 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 $2,690 per month. Depreciation expense on the office furniture and fixtures was $15,700 for the year. During the year, Ms. Chen paid interest of $14,900 on the $121,000 borrowed to start the business. She paid an average tax rate of 30% during 2019. a. Prepare an income statement for Cathy Chen, CPA, for the year ended December 31, 2019. b. Evaluate her 2019 financial performance. a. Prepare an income statement for Cathy Chen, CPA, for the year ended December 31, 2019. 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 361,000 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 180280 Employment taxes and benefits 34200 Supplies 10800 Travel and entertainment 16600 32280 Lease payment Depreciation expense 15700 289860 A Total operating expense Operating profits (EBIT)

Answer 1

Solution :-

Cathy Chen, CPA Income Statement for the year ended December 31, 2019 $361000 A. Sales Revenue Less: Operating expenses Book Keeper salary $48200 Clerical assistant salary $ 36 200 Ms. Chen Salary &1990 x12) $95880 Employment taxes and benefits $34200 Office Supplies & postages $10800 Travel and entertainment $16600 Lease Payment ($2690812) $32280 Depreciation expense $15700

$289860 B. Total Operating expense Operating profits(EBIT) $71140 (A-B) 11614900) $56240 Less & Interest expense Net Profits before tax Less Taxes (30%) Net Profits after tax ($16872) $39368 Cathy chen expenses capped all operating and profited $39368 on. sales devenue of $361000 in be her first year of business operations.