Recording the Refunding of Long-Term Debt On January 1, 2020, Rocket Corporation issued $100,000 of 6%, 20-year bonds at 98. The interest is payable each December 31. Rocket uses straight-line amortization. The company’s accounting period ends December 31.  On January 1, 2029, Rocket issued $100,000, 5% 20-year, refunding bonds at par. On this date, the old 6% bonds could be purchased in the open market at 102. Rocket immediately purchased all of the 6% bonds.  Required  a. Provide the entry for issuance of the 6% bonds on January 1, 2020.  b. Provide the entry for issuance of the 5% bonds on January 1, 2029.  c. Provide the entry to record the extinguishment of the old bonds on January 1, 2029.   Note: List multiple debits or credits (when applicable) in alphabetical order.   Date Account Name Dr. Cr. a. Jan. 1, 2020 Answer Answer Answer     Answer Answer Answer     Answer Answer Answer b. Jan. 1, 2029 Answer Answer Answer     Answer Answer Answer c. Jan. 1, 2029 Answer Answer Answer     Answer Answer Answer     Answer Answer Answer     Answer Answer Answer

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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.