Income statementpreparation On December 31, 2015, Cathy Chen, aself-employed certified pub
Income statementpreparation On December 31, 2015, Cathy Chen, aself-employed certified publicaccountant (CPA), completed her first full year in business.During the year, she billed$360,000 for her accounting services. She had two employees,a bookkeeper and a clericalassistant. In addition to her monthlysalary of $8,000, Ms. Chen paid annual salaries of $48,000 and $36,000 to thebookkeeper and theclericalassistant, respectively. Employment taxes and benefit costs for Ms.Chen and her employeestotaled $34,600 for the year. Expenses for office supplies,including postage, totaled$10,400 for the year. In addition, Ms. Chen spent $17,000during the year ontax-deductible travel and entertainment associated with clientvisitsand new businessdevelopment. Lease payments for the office space rented (a taxdeductible expense) were$2,700 per month.Depreciation expense on theoffice furniture and fixtureswas $15,600 for the year. During the year, Ms. Chen paidinterest of $15,000 on the $120,000borrowed to start the business. She paid anaverage tax rate of 30% during 2015.
a. Prepare an incomestatement for Cathy Chen, CPA, for the year ended December31, 2015.
b. Evaluate her 2015financial performance.