Pillar Steel Co. which began operations on January 4 2011 had the following subsequent transactions and events in its long-term
investments. 2011
Jan. 5-Pillar purchased 60000 shares (25% of total) of Kildaires common stock for $1895650.
Oct. 23-Kildaire declared and paid a cash dividend of $3.40 per share.
Dec. 31-Kildaires net income for 2011 is $1163500 and the fair value of its stock at December 31 is $35.00 per share. 2012
Oct. 15-Kildaire declared and paid a cash dividend of $3.00 per share.
Dec. 31-Kildaires net income for 2012 is $1477900 and the fair value of its stock at December 31 is $38.00 per share. 2013
Jan. 2-Pillar sold all of its investment in Kildaire for $2086100 cash. PART 1
Assume that Pillar has a significant influence over Kildaire with its 25% share of stock.
1. Prepare journal entries to record these transactions and events for Pillar. 2.Compute the carrying (book) value per share of Pillars investment in Kildaire common stock as reflected in the investment account on
January 1 2013. 3.Compute the net increase or decrease in Pillars equity from January 5 2011 through January 2 2013 resulting from its investment in
Kildaire.
PART 2
Assume that although Pillar owns 25% of Kildaires outstanding stock circumstances indicate that it does not have a significant influence
over the investee and that it is classified as an available-for-sale security investment. 1. Prepare journal entries to record the preceding transactions and events for Pillar. Also prepare an entry dated January 2 2013 to remove
any balance related to the fair value adjustment. 2.Compute the cost per share of Pillars investment in Kildaire common stock as reflected in the investment account on January 1
2013 3. Compute the net increase or decrease in Pillars equity from January 5 2011 through January 2 2013 resulting from its investment in
Kildaire.
