Question

On December 31, 2015, Dr. Alan Brisco, a self-employed engineering consultant, is evaluating his first year in business. During the year, he billed $500,000 for his consulting services. He had two employees: a scheduler/coordinator and an assistant. In addition to his monthly salary of $10,000, Dr. Brisco paid annual salaries of $35,000 and $46,000 to the scheduler and an assistant, respectively. Employment taxes and benefit costs for Dr. Brisco and his employees were 20% of salaries. Expenses for office supplies, including postage, totaled $7,250 for the year. In addition, Dr. Brisco spent $22,000 during the year on tax-deductible travel and entertainment associated with client visits and new business development. Lease payments for the office space and furniture rented (tax-deductible business expenses) were $3,500 per month.   Phone and Internet expenses (tax-deductible business expenses) were 1,500 per month. During the year, Dr. Brisco paid interest of $10,000 on the $250,000 borrowed to start the business. He paid an average tax rate of 25% during 2015.

Prepare an income statement for Alan Brisco, CPA, for the year ended December 31, 2015.

Answer 1

Income Statement for  Alan Brisco

For the year ended December 31, 2015

Income from consulting			500000
Less:
Salaries	(10000*12)	120000
scheduler		35000
assistant		46000
		201000
Employment taxes and benefit costs	(201000*20%)	40200
Expenses for office supplies, including postage		7250
Travel and entertainment		22000
Lease payments	(3500*12)	42000
Phone and Internet expenses	(1500*12)	18000
Interest on borrowing		10000	(340450)
Taxable Income			159550
Tax @25%			(39890)
Income after Tax			119660