The stockholders’ equity section of Pillar Corporation’s comparative balance she
ID: 2422137 • Letter: T
Question
The stockholders’ equity section of Pillar Corporation’s comparative balance sheet at the end of 2013 and 2014 is presented below. It is part of the financial data just reviewed at a stockholders’ meeting.
2,500,000
Paid-in Capital in Excess of Par...............
Retained Earnings (see Note).................
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 2014 was $1,220,000; a 10% stock dividend was issued December 14, 2014; when the stock dividend was declared, the market value was $28 per share; the market value per share at December 31, 2014, 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 dividend had been revised to $1.40 when declared and issued the last week of December 2014. As part of its investor relations program, during the stockholders’ meeting management asked stockholders to write any 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 dividend issued in December?
December 31, 2014 December 31, 2013 Common Stock, $10 Par Value, 600,000 shares authorized; issued at December 31, 2014, 275,000 shares; 2013, 250,000 shares ..................... $2,750,0002,500,000
Paid-in Capital in Excess of Par...............
4,575,000 4,125,000Retained Earnings (see Note).................
2,960,000 2,825,000 Total Stockholders’ Equity ................... $10,285,000 $9,450,000Explanation / Answer
They planned to invest in new plan addition
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