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 $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 the bookkeeper and the clerical assistant, respectively. Employment 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-deductible 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 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 S 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 $ $ Total operating expense Operating profits (EBIT) DI $ 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.) Net profits before taxes $ 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.) Net profits after taxes $ b. Evaluate her 2019015 financial performance. (Select the best answer below.) O A. In her first year of business, Cathy Chen did not cover all her operating expenses, which resulted in a net loss of $55,000 on revenues of $360,000. O B. In her first year of business, Cathy Chen did not cover all her operating expenses, which resulted in a net loss of $38,500 on revenues of $360,000. OC. In her first year of business, Cathy Chen covered all her operating expenses and earned a net profit of $55,000 on revenues of $360,000. OD. In her first year of business, Cathy Chen covered all her operating expenses and earned a net profit of $38,500 on revenues of $360,000
