Wharton, Inc., pays income taxes on capital gains (including gains on marketable securities) at a rate of 30 percent. On December 31, year 1, the company owns marketable securities that cost $180,000 but have a current market value of $220,000.

b. As of December 31, year 1, what income taxes has Wharton paid on the increase in the value of these investments?

c. Prepare a journal entry on January 4, year 2, to record the cash sale of these investments at $220,000.

d. What effect will the sale recorded in part c have on Whartons tax obligation for year 2?