Lexington Garden Supply paid $ 160,000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $ 85,000, the building $ 51,000, and the equipment $ 34,000. Journalize the lump-sum purchase of the three assets for a total cost of $ 160,000, the amount for which the business signed a note payable.

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A: Data given: Loan amount is $15,000 Nominal interest rate is 11% n= 1 year

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.