On January 1, 2021, ABC Company issued a $500,000, 8%, 10-year bond at the yield of 6%. Interest is to be paid semi-annually on July 1 and December 31 each year.  Assume a Dec 31, year end. On March 1, 2022 ABC Company decides to retire 20% of the bonds at 101 plus accrued interest. Assume that interest is paid when making the bond retirement entry. a. Make the entry at this date to update interest expense and interest payable.  b. Calculate any unamortized premium or discount to be recorded at bond retirement date.   c. Record the bond retirement and book any gain or loss on the retirement.

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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.