Income statement preparation On December 31,

20192019,

Cathy Chen, a self-employed certified public accountant (CPA), completed her first full year in business. During the year, she charged her clients

$ 366 comma 000$366,000

for her accounting services. She had two employees, a bookkeeper and a clerical assistant. In addition to her monthly salary of

$ 8 comma 050$8,050,

Ms. Chen paid annual salaries of

$ 48 comma 500$48,500

and

$ 35 comma 800$35,800

to the bookkeeper and the clerical assistant, respectively. Employment taxes and benefit costs for Ms. Chen and her employees totaled

$ 34 comma 300$34,300

for the year. Expenses for office supplies, including postage, totaled

$ 10 comma 900$10,900

for the year. In addition, Ms. Chen spent

$ 17 comma 000$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 comma 730$2,730

per month. Depreciation expense on the office furniture and fixtures was

$ 15 comma 200$15,200

for the year. During the year, Ms. Chen paid interest of

$ 14 comma 600$14,600

on the

$ 121 comma 000$121,000

borrowed to start the business. She paid an average tax rate of

30 %30%

during

20192019.

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

20192019.

b. Evaluate her

20192019

financial performance.

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

20192019.

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			$	366000

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

$

183000

Total operating expense

$

Operating profits (EBIT)

$

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

20192019015

financial performance.(Select the best answer below.)

A.In her first year of business, Cathy Chen covered all her operating expenses and earned a net profit of

$ 60 comma 340$60,340

on revenues of

$ 366 comma 000$366,000.

B.In her first year of business, Cathy Chen covered all her operating expenses and earned a net profit of

$ 42 comma 238$42,238

on revenues of

$ 366 comma 000$366,000.

C.In her first year of business, Cathy Chen did not cover all her operating expenses, which resulted in a net loss of

$ 60 comma 340$60,340

on revenues of

$ 366 comma 000$366,000.

D.In her first year of business, Cathy Chen did not cover all her operating expenses, which resulted in a net loss of

$ 42 comma 238$42,238

on revenues of

$ 366 comma 000$366,000.