On January 1, 2016, Tiger Company purchased 6,720 shares of Eagle Corporation’s
ID: 2542837 • Letter: O
Question
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.
Explanation / Answer
Solution:
Journal Entries - Tiger Company Date Particulars Debit Credit 31-Dec-16 Investment in Eagle's Corporation Dr $36,000.00 To Investment Income ($120,000*30%) $36,000.00 (Being share of income recoganised for investment in Associate enterprise - Eagle's corporation) 31-Dec-16 Cash Dr ($48,000*30%) $14,400.00 To Investment in Eagle's Corporation $14,400.00 (Being dividend received from Associate enterprise - Eagle's corporation)