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     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 the journal entries of Tiger related to its share of Eagle’s net income and dividends in 2016.

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 9 months ago

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