Week 4 Assignment

Topics: Liability, Accounts receivable, Generally Accepted Accounting Principles Pages: 3 (992 words) Published: November 2, 2014

Liability
1. Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing: Social Security taxes: 4% on the first $55,000 earned per employee Medicare taxes: 1.5% on the first $130,000 earned per employee Federal income taxes withheld from wages: $7,500

State income taxes: 4% of gross earnings
Insurance withholdings: 1% of gross earnings
State unemployment taxes: 5.4% on the first $7,000 earned per employee Federal unemployment taxes: 0.8% on the first $7,000 earned per employee The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end and no wages have been paid during the month. a. Prepare the necessary entry to record Brookhaven’s February payroll. The entry will include deductions for the following: Social Security taxes

Medicare taxes
Federal income taxes withheld
State income taxes
Insurance withholdings
• Social Security taxes: 4% on the first $55,000 earned 0.04 2000 • Medicare taxes: 1.5% on the first $130,000 earned 0.015 750 • Federal income taxes withheld from wages: $7,500 7500
• State income taxes: 5% of gross earnings 0.05 2500
• Insurance withholdings: 1% of gross earnings 0.01 500
• State unemployment taxes: 5.4% on the first $7,000 earned 0.054 2700 • Federal unemployment taxes: 0.8% on the first $7,000 earned 0.008 400 16350
b. Prepare the journal entry to record Brookhaven’s payroll tax expense. The entry will include the following: Matching Social Security taxes
Matching Medicare taxes
State unemployment taxes
Federal unemployment taxes
Brookhaven Title of account Debit Credit   Salary expense 50000     Payable Social Security taxes   2000   Payable Medicare taxes   750   Payable Federal income taxes   7500   Payable State income taxes   2500   Insurance withholdings   500   Payable Salary &Cash   35750                 Expense, Salary 6850     Payable Social Security taxes   2000   Medicare taxes...
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