On 1 January 2020, Maple Ltd. purchased $500,000 of Pine Ltd. 7% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 8% on the date of purchase. The bonds mature on 31 December 2025. Required: a) Calculate the price paid by Maple Ltd. b) Assume that the bond is classified as a FVTPL investment, and the fair value at the end of 2020 was $505,000. Prepare the entries for each interest period in 2020, and adjust the bond to fair value at the end of each fiscal 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.