Question 2

Individuals have to pay tax on their income at different rates. Income tax rates for individuals are: 10.5% on $0 to $14,000; 17.5% on $14,001 to $48,000; 30% on $48,001 to $70,000; 33% on $70,001 to $180,000; 39% on $180,001 and upwards.

Required:

1. An audit manager earns $90,000 per annum. How much income tax does the audit manager have to pay?
2. An accounting graduate earns $45,000 per annum. How much income tax does the accounting graduate have to pay?
3. Prepare the journal entry for recording the payment of the accounting graduates fortnightly salary. Assume that PAYE tax is not paid until the following month.
4. Prepare the journal entry for recording the payment of PAYE tax owed to the Government (or IRD) on the accounting graduates salary. Assume the accounting graduate was paid twice in the last month.