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 2 years agoRelated 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
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