29 Jun Question WEEK FOUR EXERCISE ASSIGNMENT
Question
WEEK FOUR EXERCISE ASSIGNMENT
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
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
2. Current liabilities: entries and disclosure.A review of selected financial activities of Visconti’s during 20XX disclosed the following:
1-Dec: Borrowed $10,000 from the First City Bank by signing a 3-month, 15% note payable.
Interest and principal are due at maturity.
10-Dec: Established a warranty liability for the XY-80, a new product. Sales are expected to
total 1,000 units during the month. Past experience with similar products indicates
that 3% of the units will require repair, with warranty costs averaging $27 per unit (parts only).
22-Dec: Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.
26-Dec: Borrowed $5,000 from First City Bank; signed a 15% note payable due in 60 days. (Assume 360 day year for interest)
31-Dec: Repaired six XY-80s during the month at a total cost of $162
31-Dec: Accrued three days of salaries at a total cost of $1,400.
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