On January 1, 2019, QQQ Company purchased bonds with face amount of P5,000,000 for P4,760,000 including transaction cost of P160,000. The business model is to collect contractual cash flows and to sell the financial asset. The bonds mature on December 31, 2021 and pay 10% interest annually on December 31 with a 12% effective yield. The bonds are quoted at 102 on December 31, 2019 and 105 on December 31, 2020. The bonds are sold on June 30, 2021 plus accrued interest. What amount should be recognized as gain on sale of bond investment on June 30, 2021?

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Q: interest inco

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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.