On December 31, 2015, Cathy Chen, a self-employed
certified public accountant (CPA), completed her first full year in business.
During the year, she billed $359,000 for her accounting services. She had two
employees, a bookkeeper and a clerical assistant. In addition to her monthly
salary of $8,010, Ms. Chen paid annual salaries of $48,400 and $36,400 to the
bookkeeper and the clerical assistant, respectively. Employment taxes and
benefit costs for Ms. Chen and her employees totaled $34,000 for the year.
Expenses for office supplies, including postage, totaled $10,300 for the
year. In addition, Ms. Chen spent $17,100 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 $$2,670 per month. Depreciation expense on the office furniture and
fixtures was $15,400 for the year. During the year, Ms. Chen paid interest of
$14,700 on the $120,000 borrowed to start the business. She paid an average tax
rate of 30% during 2015.
a. Prepare an income statement for Cathy Chen, CPA, for the year ended December 31, 2015.
b. Evaluate her 2015 financial performance.
Contact Us Below To Get Tutoring
