The shareholders equity section of Carswell Corporations comparative statement of financial position at the end of 2016

Question:

The shareholders€™ equity section of Carswell Corporation€™s comparative statement of financial position at the end of 2016 and 2015 was presented as follows at a recent shareholders€™ meeting:

The following items were also disclosed at the shareholders€™ meeting:
€¢ Net income for 2016 was $666,000.
€¢ A 16% stock dividend was issued on December 14, 2016, when the market value was $18 per share.
€¢ The market value per share on December 31, 2016, was $16.
€¢ Management has put aside $900,000 and plans to borrow $200,000 to help finance a new plant addition, which is expected to cost a total of $1 million.
€¢ The customary $1.74 per share cash dividend was revised to $1.50 for the cash dividend declared and paid in the last week of December 2016.
As part of their shareholders€™ goodwill program, management asked shareholders to write down any questions they might have concerning the company€™s operations or finances. As assistant controller, you are given the shareholders€™ questions.
Required:
Prepare brief but reasonably complete answers to the following questions from shareholders.
a. What did Carswell do with the cash proceeds from the stock dividend issued in December?
b. I owned 5,000 shares of Carswell in 2015 and have not sold any shares. How much more or less of the corporation do I own on December 31, 2016? What happened to the market value of my interest in the company?
c. I heard someone say that stock dividends don€™t give me anything I didn€™t already have. Are you trying to fool us? Why did you issue one?
d. Instead of a stock dividend, why didn€™t you declare a cash dividend and let us buy the new shares that were issued?
e. Why are you cutting back on the dividends I receive?
f. If you have $900,000 put aside for the new plant addition that will cost $1 million, why are you borrowing $200,000 instead of just the missing $100,000?

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