What was the effect of the sale of the security

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Question - A company purchased a marketable security for $10,000 on 3/3/2013. On 3/30/2013, the company prepared its financial statements and marked the security to its market value, which was $17,500. The security was sold on 4/30/2013 for $15,000. The company used the Trading Securities method to account for the security. The statutory tax rate is 35%.

What was the effect of the sale of the security on Income Tax Payable on 4/30/2013?

$1,750 increase in Income Tax Payable.

$875 increase in Income Tax Payable.

$1,750 decrease in Income Tax Payable.

$875 decrease in Income Tax Payable.

There was no effect on Income Tax Payable.

Reference no: EM132482038

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