The stockholders’ equity section of Pillar Corporation’s comparative balance she

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.

I owned 7,500 shares of Pillar in 2013 and have not sold any shares. How much more or less of the corporation do I own at December 31, 2014, and what happened to the market value of my interest in the company?

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 ..................... $2,750,000

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 $9,450,000

Explanation / Answer

No of shares as on dec 31st 2013=250,000
No of shares as on dec 31st 2014=275,000

% of shares held as on dec 31st 2013=7500/250000=3%

% of shares held as on dec 31st 2014=(7500*1.1)/275000=3%

you won same as what you hold in dec 31st 2013

market value of your interest in comoany as on dec 31st 2014
=(7500*26)/(275000*26)=2.73%

market value of your interest in comoany as on dec 31st 2013
=(7500*28)/(250000*28)=2.73%

ayour value of interest in company is not changed

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.