Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing:   Social Security taxes: 4% on the...

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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                                   

 

 

 

The journal entry would then be:

 

Salary expense 50000 DR

 

Social Security taxes payable 3000 CR

 

Medicare taxes payable 750 CR

 

Federal income taxes payable 7500 CR

 

State income taxes payable 2500 CR

 

Insurance with-holdings payable 500 CR

 

 

 

Salary payable 35750 CR

 

 

 

b. Prepare the journal entry to record Brookhaven’s payroll tax expense. The entry will include the following:

 

  • Matching Social Security taxes$3000

  • Matching Medicare taxes $750

  • State unemployment taxes

  • Federal unemployment taxes

 

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