previous question On January 1, 20X1, a company financed the sale of equipment and recorded a note receivable for the sale. The account recorded the sale at the face value and coupon rate in the below income statement Notes receivable (Face value) Tax rate Note receivable information: 430,000 30% Term of the note Coupon rate Market rate 8 years 1.2% 5.6% The note is due in equal annual payments of principle and interest. Incorrect income statement, for the year ended December 31, 20X1 Sales Interest revenue Cost of goods sold Expenses Pretax income Tax expense $1,832,200 5,160 826.300 657.800 353,260 105 978 $247.282 Net income What is correct amount of sales that should be reported on the income statement?

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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.