On January 1, 2019, 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:
During 2019, Eagle earned net income of $120,000 and paid total dividends of $48,000. Prepare the journal entries of Tiger related to its share of Eagle’s net income and dividends in 2019.
Record the journal entries in the books of Company T related to its share of Corporation E’s net income and dividends in 2019.
Investment: It refers to the process of using the currently held excess cash to earn profitable returns in future. The investments can be made in equity securities such as shares or debt securities such as bonds.
Record the journal entries in the books of Company T related to its share of Corporation E’s net income and dividends in 2019.
Date | Account title and explanation | Debit ($) | Credit ($) |
 | Investment in stock: Corporation E (1) | 36,000 |  |
 | Investment income |  | 36,000 |
 | (To record the share of net income) |  |  |
 |  |  |  |
 | Investment income | 750 |  |
 | Investment in stock: Corporation E (2) |  | 750 |
 | (To record the fair value adjustment) |  |  |
 |  |  |  |
 | Cash (3) | 14,400 |  |
 | Investment in stock: Corporation E |  | 14,400 |
 | (To record the share of dividends) |  |  |
Table (1)
Working note (1):
Calculate the amount of investment income:
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