Liability: Tax and Social Security Taxes
Liability
Alex Washington
ACC 205 Principles of Accounting I
Instructor: James Rodisch
July 28, 2013
1. 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 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: 5% 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.
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
Gross payroll Payroll Deductions:
Gross salaries & Wages $50,000
Federal Income tax withheld $7,500
Social Security tax 6% $330
State income tax 5% $250
Insurance withheld 1% $50
Medicare tax 1.5% $195
Alex Washington
ACC 205 Principles of Accounting I
Instructor: James Rodisch
July 28, 2013
1. 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 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: 5% 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.
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
Gross payroll Payroll Deductions:
Gross salaries & Wages $50,000
Federal Income tax withheld $7,500
Social Security tax 6% $330
State income tax 5% $250
Insurance withheld 1% $50
Medicare tax 1.5% $195