On February 18, 2021, Union Corporation purchased 1,311 IBM bonds as a long-term investment at their face value for a total of $1,311,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $1,273,000 and $1,330,000, respectively. Required: 2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for a

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Q: On February 18, 2021, Union Corporation purchased 1,056 IBM bonds as a long-term investment at their…

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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.