Question

In: Accounting

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 1 year ago
Next > < Previous

Related Solutions

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,...
On January 1, 2016, Halstead, Inc., purchased 71,000 shares of Sedgwick Company common stock for $1,392,000,...
On January 1, 2016, Halstead, Inc., purchased 71,000 shares of Sedgwick Company common stock for $1,392,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired was attributed solely to goodwill. Sedgwick reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Dividends are declared and paid in the same period. Net Income Annual Cash Dividends (paid quarterly) 2016 $406,000...
On January 1, 2016, Halstead, Inc., purchased 81,000 shares of Sedgwick Company common stock for $1,533,000,...
On January 1, 2016, Halstead, Inc., purchased 81,000 shares of Sedgwick Company common stock for $1,533,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired was attributed solely to goodwill. Sedgwick reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Dividends are declared and paid in the same period. Net Income Annual Cash Dividends (paid quarterly) 2016 $378,000...
On January 1, 2011, Perelli Company purchased 90,000 of the 100,000 outstanding shares of common stock...
On January 1, 2011, Perelli Company purchased 90,000 of the 100,000 outstanding shares of common stock of Singer Company as a long-term investment. The purchase price of $5,003,400 was paid in cash. At the purchase date, the balance sheet of Singer Company included the following: Current assets $2,904,100 Long-term assets 3,888,100 Other assets 764,000 Current liabilities 1,547,100 Common stock, $20 par value 2,001,400 Other contributed capital 1,888,600 Retained earnings 1,612,000 Additional data on Singer Company for the four years following...
A company (the investor) purchased 860 shares of the investee’s common stock for $107,000 on January...
A company (the investor) purchased 860 shares of the investee’s common stock for $107,000 on January 2, 2021. The investee had 2,000 outstanding shares. During 2021, the investee declared dividends of $56,000 and reported earnings for the year of $452,000. If the investor company uses the equity method of accounting for its investment in the investee, its Investment in the investee account at December 31, 2021 should be
Lion Corporation purchased 15% of the common stock of Tiger Company on March 1, 20X1 which...
Lion Corporation purchased 15% of the common stock of Tiger Company on March 1, 20X1 which gave them no influence over Tiger. This is Tiger's first year in business. Lion made the following journal entries during 20X1 to account for its investment in Tiger. Investment in Tiger Co. 104,418 Cash 104,418 Cash 21,000 Dividend Income 15,000 Investment in Tiger Co. 6,000 Unrealized Gain/Loss 4,525 Investment in Tiger Co. 4,525 Using this information, answer the following question: What is the total...
On January 1, 2019, Halstead, Inc., purchased 71,000 shares of Sedgwick Company common stock for $1,485,000,...
On January 1, 2019, Halstead, Inc., purchased 71,000 shares of Sedgwick Company common stock for $1,485,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired was attributed solely to goodwill. Sedgwick reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Dividends are declared and paid in the same period. Net Income Annual Cash Dividends (paid quarterly) 2019 $407,000...
2. On January 1, 20X8, Ball Corporation purchased shares of Leftwich Company common Stock. a. Assume...
2. On January 1, 20X8, Ball Corporation purchased shares of Leftwich Company common Stock. a. Assume the stock acquired by Ball represents 15% of Leftwich’s voting stock and that Ball has no influence over Leftwich’s business decisions. Use the financial statement effects template (with amounts and accounts) to record the following transactions. i. Ball purchased 5,000 common shares of Leftwich at $15 cash per share. ii. Leftwich reported annual net income of $40,000. iii. Ball received a cash dividend of...
   On January 1, 2016, A Corp. issued shares of its common stock to acquire all of...
   On January 1, 2016, A Corp. issued shares of its common stock to acquire all of the outstanding common stock of B Inc. B’s book value was only $140,000 at the time, but A issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. A was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on B's records by $60,000 while equipment (five-year life) was undervalued...
Jeffery Company purchased 10% of the outstanding common stock (75,000 shares) of Another Company on January...
Jeffery Company purchased 10% of the outstanding common stock (75,000 shares) of Another Company on January 1, 2020 for $750,000. The investment was not sufficient to give Jeffery Company the ability to significantly influence the operations of Another Company. On January 1, 2020, the fair value of the percentage of Another Company’s net assets purchased by Jeffery Company exceeded book value by $20,000. The difference was attributable to plant assets with remaining useful life of five years. During 2020, Another...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT