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On January 1, 20X1, Meadow Company purchased investment securities for $2,000. The securities are classified as trading. By December 31, the securities had a fair
On January 1, 20X1, Meadow Company purchased investment securities for $2,000. The securities are classified as trading. By December 31, the securities had a fair value of $4,200 but had not yet been sold. Meadow also recognized a $7,000 restructuring charge during the year. The restructuring charge is composed of an impairment write-down on a manufacturing facility. Tax rules do not allow a deduction for the write-down unless the facility is actually sold; the facility was not sold by the end of the year. Excluding the $2,200 unrealized gain on the trading securities and the $7,000 restructuring charge, income before taxes for the year was $25,000. Assume that there are no other book-tax differences. Also, assume that future income will be sufficient to allow for full utilization of any income tax benefits arising in 20X1. The income tax rate is 30% for the current year and all future years. Which ONE of the following should be included in Meadow's journal entry to record income tax expense in 20X1? DEBIT Income Tax Expense for $6,060 CREDIT to Income Taxes Payable for $6,060 CREDIT Deferred Income Tax Liability for $2,100 DEBIT Deferred Income Tax Asset for $660
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