LG$1$

P$3-2$ Income statement preparation Cathy Chen, a self$-$employed certified public accountant $($CPA$),$ just completed her first full year in business. During the year, she charged her clients $$360,000$ for accounting services. She had two employees, a bookkeeper, and a clerical assistant. In addition to her monthly salary of $$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 $$17,000$ during the year on taxdeductible travel and entertainment associated with client visits and new business development. Lease payments for the office space rented $($a tax$-$deductible expense$)$ were $$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. Her average tax rate for the year was $30\%.$

a$.$ Prepare an income statement for Cathy's business for the year.

b$.$ Evaluate her financial performance for the year.