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On January 1, 2016, Tiger Company purchased 6,720 shares of Eagle Corporation’s common stock when Eagle...

On January 1, 2016, Tiger Company purchased 6,720 shares of Eagle Corporation’s common stock when Eagle had 22,400 shares outstanding. On that date, the following information pertained to Eagle:

Eagle Corporation Balance Sheet January 1, 2016

Depreciable assets (remaining life, 8 years) Book Value $600,000.00 Fair Value $620,000.00
Other non-depreciable assets Book Value 290,000.00 Fair Value 300,000.00
Total Book Value $890,000.00 Fair Value $920,000.00
Liabilities Book Value $300,000.00 Fair Value $330,000.00
Shareholders’ equity Book value $590,000.00
Total $890,000.00
During 2016, Eagle earned net income of $120,000 and paid total dividends of $48,000. Required: Prepare the journal entries of Tiger related to its share of Eagle’s net income and dividends in 2016.

Prepare the journal entries of Tiger on December 31 related to its share of Eagle’s net income and receipt of dividends in 2016. (6 Accounts)

Solutions

Expert Solution

Percentage % of shareholding of Eagle
Total no of shares of Eagle 22400
No of shares purchased by Tiger 6720
% of shareholding 30%
Journal entry in the books of Tiger
Dr/Cr Particulars Debit $ Credit $
Debit Investment in Eagle    36,000
Credit Profit and loss accounts (other income)     36,000
(To record the net income of eagle in the investment as per the equity method to the extent of 30%)
=120,000*30%
Dr/Cr Particulars Debit $ Credit $
Debit Bank    14,400
Credit Investment in Eagle     14,400
(To record the dividend income of eagle in the investment as per the equity method to the extent of 30%)
=48,000*30%

ekkarill92 answered 1 year ago
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On January 1, 2016, Tiger Company purchased 6,720 shares of Eagle Corporation’s common stock when Eagle had 22,400 shares outstanding. On that date, the following information pertained to Eagle: Eagle Corporation Balance Sheet January 1, 2016 Depreciable Assets (remaining life, 8 years) Book Value     Fair Value $600,000.00   $620,000.00 Other non-depreciable assets 290,000.00      300,000.00 Total $890,000.00    $920,000.00 Liabilities $300,000.00     $330,000.00 Shareholders’ equity 590,000.00 Total $890,000.00 During 2016, Eagle earned net income of $120,000 and paid total dividends of $48,000. Required: Prepare...
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