1. Prepare a Profit and Loss Statement for the combined January and February

entries.

2. Calculate your cost per page for photocopying.

3. Calculate your cost of operating per billable hour.

4. Calculate your hourly rate per billable hour per client.

In January:

You start your own business, a sole proprietorship, as an environmental consultant on January 1, 2017, doing business as EH & S Consulting. You contract with clients to perform consulting services and charge them an hourly rate for your time. Clients will also reimburse you for out of pocket expenses such as photo copy costs, travel expenses, and any other out-of-pocket expenses.

Because you are a personal services company you decide to keep your books and records on a cash basis rather than an accrual basis.

To start your business you take $5,000.00 from your personal savings account and borrow $30,000.00 from your local bank. The bank loan is for five years at 5.5% interest and your monthly payment which starts on February 1^st is $573.00. The amortization table for the loan is at the end of this problem.

You rent office space for $1,200.00 per month by signing a two-year lease. You pay $3,600.00 as the first months rent, last months rent and security deposit on January 2^nd.

You purchase $624.97 in office supplies by charging the cost on your personal credit card during the month of January and then reimburse yourself for the cost on January 31^st by writing a company check to yourself.

You buy office equipment that was listed as costing $4000.00 for $3,750.00 (computers, copier, fax, printer, telephones) by signing a purchase agreement that allows you to take the equipment for no money down, and no interest payment, by paying $156.25 per month starting on January 15, 2017 for two years. At the end of the two year period the equipment will have no residual value.

You sign a twenty four month contract for telephone and internet service from a service provider for $275.00 per month. Your first payment was made on January 1^st and all future payments are due on the first of the month.

Your purchase business insurance (excluding malpractice insurance) and the premium for one year is $1,600.00 and is due February 1^st.

Business is good that first month, and on January 31^st you bill the following clients for services rendered:

Name	Fees	Reimbursable costs
Able Company	$4,650.00	$329.87
Baker Company	$4,127.00	$43.72
Charlie Company	$2,375.00	$157.73
Delta Company	$6,750.00	$422.69
Total	$17,902.00	$954.01

The Reimbursable costs you billed to clients was for out of pocket travel costs, so you write a check to yourself on January 31^st for $954.01.

Your cost of mailings and stamps for January was $128.43

In February:

You pay all expenses that are monthly repeating expenses such as rent, telephone and internet services, loan payments, etc. that are due in February.

On the 14^th of February you pay $1,250.00 to advertise your business in a local professional journal. The advertisement will show up during the last week in March.

You purchase $477.29 in office supplies.

You pay $237.00 to the local power company for utilities for the month of January.

During February you decide to charge your clients for photocopying at the rate of $0.25 per page. After all, this can become a nice little profit item for you.

During February you hire an accounting service to undertake your bookkeeping duties, and to file all relevant tax returns starting in March 2017. You pay them $325.00 to look over your current bookkeeping system.

On February 20^th you take a draw of $3,000.00. After all you have to pay yourself for doing all this work.

Your bank charges you $45.00 for new checks. They deduct this sum from you bank balance.

Your cost of postage and stamps for February was $110.40

You paid $525.00 in professional dues for 2017.

You paid $832.57 for miscellaneous office expenses.

You pay $400.00 for a local business license, which is good for 2017.

On February 28^th you bill your clients for services rendered:

Name	Fees	Costs
Able Company	$4,375.00	$147.93
Baker Company	$5,325.00	$763.86
Charlie Company	$5,000.00	$432.78
Delta Company	$1,250.00	$458.90
Total	$15,950.00	$1,803.47

Some of the Costs you billed to your clients was for out of pocket travel and mileage expenses, so on February 28^th you write a check to yourself for $1,236.47 as travel and mileage reimbursement. The remainders of the Costs are for photocopying charges.

On February 8^th you receive a check from Able Company for January services of $4,979.87.

On February 12^th you receive a check from Baker Company for $3,750.00 along with a note saying that they think the services you rendered in January are only worth $3,750.00; therefore they are not paying the rest of the bill. You decide not to go after them for the remaining unpaid January fees and costs.

On February 15^th you receive a check from Charlie Company for services you rendered in January for $2,375.00 along with a note saying that they will not pay for the costs, since those costs should be borne by you, not them.

On February 27^th you receive a note from Delta Company saying that they went into bankruptcy and this will not pay any of your bills. You call your attorney who tells you that since you are an unsecured creditor your chance of any recovery is nil, so just write the amount off to experience, which you do.

At the end of February you added the hours worked on each clients matters, and arrived at the following conclusion:

Name	Fees	Hours
Able Company	$4,650.00	40.3
	$4,375.00	27.6
Baker Company	$4,127.00	43.7
	$5,325.00	72.1
Charlie Company	$2,375.00	17.5
	$5,000.00	50.7
Delta Company	$6,750.00	74.2
	$1,250.00	14.6

Cost of Photocopying

Your copier cost you $1,295.00 when you bought it in January along with your other office equipment. The copier paper costs $5.00 per 500 sheets. The ink supply cost $42.35 per cartridge, and the cartridge lasts four months. In total, you make about 1,500 copies per month, only some of which are billed to clients. The copier will last four years before you must replace it, and when you do the trade in value will be $50.00. The copier company tells you that it takes about $10.00 of electricity per month to operate the copier. The copier takes up about 1/20 of the floor space of your office. Because you most often copy multi page reports, you estimate it takes you, on average, two minutes of you time per 30 copies. Ideally, you would like to get $100.00 per hour for your time.

Amortization table for your 5 year loan

Date	Interest	Principal	Balance
Feb, 2017	$138	$436	$29,564
Mar, 2017	$136	$438	$29,127
Apr, 2017	$133	$440	$28,687
May, 2017	$131	$442	$28,246
Jun, 2017	$129	$444	$27,802
Jul, 2017	$127	$446	$27,357
Aug, 2017	$125	$448	$26,909
Sep, 2017	$123	$450	$26,459
Oct, 2017	$121	$452	$26,008
Nov, 2017	$119	$454	$25,554
Dec, 2017	$117	$456	$25,098
2017	$1,401	$4,902	$25,098
Jan, 2018	$115	$458	$24,640
Feb, 2018	$113	$460	$24,180
Mar, 2018	$111	$462	$23,717
Apr, 2018	$109	$464	$23,253
May, 2018	$107	$466	$22,787
Jun, 2018	$104	$469	$22,318
Jul, 2018	$102	$471	$21,847
Aug, 2018	$100	$473	$21,374
Sep, 2018	$98	$475	$20,899
Oct, 2018	$96	$477	$20,422
Nov, 2018	$94	$479	$19,943
Dec, 2018	$91	$482	$19,461
2018	$1,240	$5,637	$19,461
Jan, 2019	$89	$484	$18,977
Feb, 2019	$87	$486	$18,491
Mar, 2019	$85	$488	$18,003
Apr, 2019	$83	$491	$17,512
May, 2019	$80	$493	$17,020
Jun, 2019	$78	$495	$16,525
Jul, 2019	$76	$497	$16,027
Aug, 2019	$73	$500	$15,528
Sep, 2019	$71	$502	$15,026
Oct, 2019	$69	$504	$14,522
Nov, 2019	$67	$506	$14,015
Dec, 2019	$64	$509	$13,506
2019	$922	$5,955	$13,506
Jan, 2020	$62	$511	$12,995
Feb, 2020	$60	$513	$12,482
Mar, 2020	$57	$516	$11,966
Apr, 2020	$55	$518	$11,448
May, 2020	$52	$521	$10,927
Jun, 2020	$50	$523	$10,404
Jul, 2020	$48	$525	$9,879
Aug, 2020	$45	$528	$9,351
Sep, 2020	$43	$530	$8,821
Oct, 2020	$40	$533	$8,288
Nov, 2020	$38	$535	$7,753
Dec, 2020	$36	$537	$7,216
2020	$586	$6,291	$7,216
Jan, 2021	$33	$540	$6,676
Feb, 2021	$31	$542	$6,133
Mar, 2021	$28	$545	$5,589
Apr, 2021	$26	$547	$5,041
May, 2021	$23	$550	$4,491
Jun, 2021	$21	$552	$3,939
Jul, 2021	$18	$555	$3,384
Aug, 2021	$16	$558	$2,826
Sep, 2021	$13	$560	$2,266
Oct, 2021	$10	$563	$1,703
Nov, 2021	$8	$565	$1,138
Dec, 2021	$5	$568	$570
2021	$231	$6,645	$570
Jan, 2022	$3	$570	$0