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