On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange for $15,700. On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common stock for $96,500. During the next two years, the following information is available for Zip Company: Common Stock Fair Value (12/31) $ 314,000 386,000 489,000 Year 2022 2023 2024 Income $ 74,000 86,000 Dividends Declared $6,000 14,700 At December 31, 2023, Zip reports a net book value of $294,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2023. Required: a. Assume Akron applies the equity method to its Investment in Zip account: 1. What amount of equity income should Akron report for 2024? 2. On Akron's December 31, 2024, balance sheet, what amount is reported for the Investment in Zip account? b. Assume Akron uses fair-value accounting for its Investment in Zip account: 1. What amount of income from its investment in Zip should Akron report for 2024? 2. On Akron's December 31, 2024, balance sheet, what amount is reported for the Investment in Zip account?

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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.