Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Microloft Inc. pays income taxes on capital gains at a rate of 25 %. At 31. December 2020, the company owns marketable securities that cost

Microloft Inc. pays income taxes on capital gains at a rate of 25 %. At 31. December 2020, the company owns marketable securities that cost $ 475.000 but have a current market value of

$ 730.000.

a) How will the users of Microlofts financial statements be made aware of this substantial increase in the market value of the companys investment ? Provide Journal entry if needed. (4 points)

b) Provided the value increase of marketable securities as of 31. December 2020, what income taxes Microloft will have to pay for this ? Explain and calculate if possible. (4 points)

c) Prepare all necessary journal entries at 5. March 2021 to record the cash sale of these investments at $ 398.000. (4 points)

d) What effect will the sale recorded in part c) have on Microlofts tax obligation for 2021 ?

(4 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

4 Repeat (a) of the previous exercise for (i) H. > Ho, (u) HH < Ho-

Answered: 1 week ago