To determine interest income for Velor, you take investment of 473,440 divided by 20 to get 23,672. To determine interest income for Southgate, you take investment of 232,000 divided by 20 to get 11,600.

How do you determine this value of 20 to be able to determine interest income?

On July 1, 2015, Gulf Corp. acquired the following bonds, which Gulf Corp. intended to hold to maturity: Bond Price Face Amount Purchased Velor Inc. 11% bonds, maturity date December 31, 2022 107.6 $440,000 Southgate Inc. 8% bonds, maturity date, December 31, 2021 92.8 250,000 Both bonds pay interest annually on December 31. Premium and discount will be amortized on an effective interest basis. Assume a market rate of 10% and Gulf Corp. follows IFRS. Please make sure your final answer(s) are accurate to 2 decimal places. 1) Prepare the following journal entries to be made on their correct dates in 2015: a. The acquisition of the investments. Accrued interest was paid on the acquisition dates, as appropriate. b. The receipt of interest and the amortization of the premium or discount for Velor Inc. c. The recelpt of Interest and the amortization of the premium or discount for Southgate Inc. Enter the transaction letter as the description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (.e., January 15 would be 15/Jan). General Journal Page G5 Date Account/Explanation PR Debit Credit 1/Jul Investments, Velor Inc. bands. 473,440 Investments, Southgate Inc. bonds 232,000 Interest receivable 34,200 Cash 739,640 a 31/Dec Cash 48,400 Interest receivable 24,200 Interest income 40.680 Investments, Velor Inc. bonds 16,480 b 31/Dec Cash 20,000 Interest receivable 10,000 Interest income 29,586 Investments, Southgate Inc. bonds 19,586 C C Marking: Journal Entry 1: (a): Acquisition of the investments You have completed this entry correctly. Journal Entry 2: (b): Receipt of interest and the amortization Velor Inc. 'Interest income' should be credited for the amount of $23,672, but you have not done this. This will cost you 1 mark. 'Investments, Velor Inc. bonds' should be credited for the amount of $528, but you have not done this. This will cost you 1 mark. You have not placed all accounts which are debited before those which are credited, however you will not lose any marks for this. Journal Entry 3 : (c): Receipt of interest and the amortization in Southgate Inc 'Investments, Southgate Inc. bonds' should be debited for the amount of $1,600, but you have not done this. This will cost you 1 mark. 'Interest income' should be credited for the amount of $11,600, but you have not done this. This will cost you 1 mark. You have not placed all accounts which are debited before those which are credited, however you will not lose any marks for this