Question
The following Items were also disclosed at the stockholders' meeting: net income for 2015 was $1,220,000; a 10% stock dividend was issued December 14, 2015;
The following Items were also disclosed at the stockholders' meeting: net income for 2015 was $1,220,000; a 10% stock dividend was issued December 14, 2015; when the stock dividend was declared, the market value was $28 per share; the market value per share at December 31, 2015 was $26; management plans to borrow $500,000 to help finance a new plant addition, which is expected to cost a total of $2,300,000; and the customary $1.54 per share cash has been revised to $1.40 when declared and issued the last week of December 2015. As part of its investor relations program, during the stockholders' meeting management asked stockholders to write questions they might have concerning the firm's operations or finances. As assistant controller, you are given the stockholders' questions:
- What did Pillar do with the cash proceeds from the stock dividends issued in December?
- What was my book value per share at the end of 2014 and 2015
- I owed 7,500 shares of Pillar in 2014 and have not sold any shares. How much more or less of the corporation do I own at December 31, 2015 and what happened to the market value of my interest in the company?
- I heard someone say that stock dividends don't give me anything I didn't already have. Why did you issue one? Are you trying to fool me?
- Instead of a stock dividend, why didn't you declare a cash dividend and let us buy the new shares that were issued?
- Why are you cutting back on the dividends I received?
- If you have $2,000,000 put aside in retained earnings for the new plant addition, which will cost $2,000,000, why are you borrowing $500,000 instead of just $300,000 needed?
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