Watson Co. provides various fringe benefits for its three employees. It provides vacation and personal leave at the rate of one day for each month worked. Its employees earn a combined total of approximately $500 per day. In addition, Watson Co. pays $780 per month in medical insurance premiums for its employees. Watson also contributes $400 per month into a retirement plan for the employees.
Assume the Social Security tax rate is 6% of the first $110,000 of salaries and the Medicare tax rate is 1.5%. The unemployment tax rate is 5.2% on the first $7,000 of earnings per employee.

Required
a. Prepare the monthly journal entry for the accrued fringe benefits.
b. Show the effect of the above transaction on a statements model like the one shown below:

c. If the three employees each worked 280 days for the year, what is Watson Co.€™s total payroll cost (salary, payroll taxes, and fringe benefits) for the year? (Assume that each employee earns $250 perday.)

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Assets = Liabilities + Equity Income Statement Cash Floww Cash Various Payables Com. Stk. + Ret. Earn. Rev. Exp. Net Inc.