Accounting for Marketable Securities
McGoun Industries pays income taxes on capital gains at a rate of 30 percent. At December 31 2011, the company owns marketable securities that cost $90,000 but have a current market value of $260,000.
a. How will users of McGoun's financial statements be made aware of this substantial increase in the market value of the company's investments?
b. As of December 31, 2011 , what income taxes has McGoun paid on the increase in value of these investments?Explain.
c. Prepare a journal entry at January 4, 2012, to record the cash sale of these investments at $260,000.
d. What effect will the sale recorded in part c have onMcGoun's tax obligation for2012?
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