On March 1, 2021, Baddour, Inc., issued 10% bonds, dated January 1, with a face amount of $160 million. The bonds were priced at $140 million (plus accrued interest) to yield 12%. Interest is paid semiannually on June 30 and December 31. Baddour’s fiscal year ends September 30.Required:1. What would be the amount(s) related to the bonds Baddour would report in its balance sheet at September 30, 2021?2. What would be the amount(s) related to the bonds that Baddour would report in its income statement for the year ended September 30, 2021?3. What would be the amount(s) related to the bonds that Baddour would report in its statement of cash flows for the year ended September 30, 2021?

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A: Requirement 1:

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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.