Acc205 Principles of Accounting: Week 4 Ex 2 Assume that the following tax rates and payroll

Acc205 Principles of Accounting
Week Four Exercise Assignment - Liability (2013 Version)

2. Payroll accounting.
Assume that the following tax rates and payroll information pertain to Brookhaven Publishing:

· Social Security taxes: 6% on the first $55,000 earned

· Medicare taxes: 1.5% on the first $130,000 earned

· Federal income taxes withheld from wages: $7,500

· State income taxes: 5% of gross earnings

· Insurance withholdings: 1% of gross earnings

· State unemployment taxes: 5.4% on the first $7,000 earned

· Federal unemployment taxes: 0.8% on the first $7,000 earned

The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end.

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

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
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