Income statement preparation On December 31, 2015, Cathy Chen, a self-employed terrified public accountant (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 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 2015.

1. Prepare an income statement for Cathy Chen, CPA, for the year ended December 31, 2015.

2. Evaluate her 2015 financial performance.