By Jerrod Keune
ACC 205: Principles of Financial Accounting I
Instructor: Erina Master
28 May 2015
Week Four Exercise Assignment
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
Social Security Taxes
Federal Income Taxes
State Income Taxes
State Unemployment Taxes
Federal Unemployment Tax
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
Federal income taxes withheld
State income taxes
Social Security Taxes
$2,000 Medicare Taxes
$750 Federal Income Tax
$7,500 State Income Tax
$2,000 Insurance Withholdings
$500 Net Payroll Payable
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
Social Security Payable
2000 Medicare Payable
750 State Unemployment Payable
2700 Federal Unemployment Payable
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.
a. Prepare journal entries to record the transactions.
b. Prepare adjusting entries on December 31 to record accrued interest.
(10,000 * 15%)/12
(5,000 * 15%)/(60/360)
3. Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ending October 31:
2-Aug: Borrowed $55,000 from the Bank of Kingsville by