Pete Mehling is the president of Mehling Company, and his cousin, John Mehling, is the vice president. Their compensation package includes bonuses of 3% for Pete Mehling and 2% for John Mehling of net income that exceeds $200,000. Net income for the year 2003 has just been computed to be $990,000.
1. Compute the amount of bonuses to be paid to Pete and John Mehling.
2. Prepare the journal entries to record the accrual and payment of the bonuses. Summarize all withholding taxes related to the bonuses in an account called Various Taxes Payable. Taxes payable on the bonuses total $9,200 for Pete and $6,300 for John.
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