During 2016, Eagle earned net income of $120,000 and paid total dividends of $48

Question

During 2016, Eagle earned net income of $120,000 and paid total dividends of $48,000.

Required:

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

1

Book Value

Fair Value

2

Depreciable assets (remaining life, 8 years)

$600,000.00

$620,000.00

3

Other non-depreciable assets

290,000.00

300,000.00

4

Total

$890,000.00

$920,000.00

5

Liabilities

$300,000.00

$330,000.00

6

Shareholders’ equity

590,000.00

7

Total

$890,000.00

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

Explanation / Answer

Net income    120,000 total dividend paid      48,000 Percentage of holding 30% (6720/22400) Journal Debit Credit Cash      14,400 Dividend income              14,400 Investment      36,000 Retained earnings              36,000

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