Understanding Shareholders Meeting, Managerial Communications, and Financial Interpretations.

The stockholders equity section of Pillar Corporations comparative balance sheet at the end of 2014 and 2015 is presented below. It is part of the nancial data just reviewed at a stockholders meeting.

December 31, 2015 December 31, 2014

Common stock, $10 par value, 600,000 shares

authorized; issued at

December 31, 2015, 275,000 shares;

2014, 250,000 shares .................................................$2,750,000 $2,500,000

Paid-in capital in excess of par .....................................4,575,000 4,125,000

Retained earnings (see Note) .......................................2,960,000 2,825,000

Total stockholders equity.......................................... $10,285,000 $9,450,00

Note: Availability of retained earnings for cash dividends is restricted by $2,000,000 due to a planned plant expansion.

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 nance a new plant addition, which is expected to cost a total of $2,300,000; and the customary $1.54 per share cash dividend had 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 any questions they might have concerning the rms operations or nances. As assistant controller, you are given the stockholders questions.

Prepare brief but reasonably complete answers to the following questions:

a. What did Pillar do with the cash proceeds from the stock dividend issued in December?

b. What was my book value per share at the end of 2014 and 2015?

c. I owned 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?

d. I heard someone say that stock dividends dont give me anything I didnt already have. Why did you issue one? Are you trying to fool us?

e. Instead of a stock dividend, why didnt you declare a cash dividend and let us buy the new shares that were issued?

f. Why are you cutting back on the dividends I receive?

g. If you have $2,000,000 put aside in retained earnings for the new plant addition, which will cost $2,300,000, why are you borrowing $500,000 instead of just the $300,000 needed?