Question

The stockholders’ equity section of Pillar Corporation’scomparative balance sheet at the end of 2013 and 2014 is presentedbelow. It is part of the financial data just reviewed at astockholders’ meeting.

	December 31, 2014	December 31, 2013
Common Stock, $10 Par Value,600,000 shares
authorized; issued at
December 31, 2014, 275,000shares;
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

Note: Availability of retained earnings for cash dividends isrestricted 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 dividendwas issued December 14, 2014; when the stock dividend was declared,the market value was $28 per share; the market value per share atDecember 31, 2014, was $26; management plans to borrow $500,000 tohelp finance a new plant addition, which is expected to cost atotal of $2,300,000; and the customary $1.54 per share cashdividend had been revised to $1.40 when declared and issued thelast week of December 2014. As part of its investor relationsprogram, during the stockholders’ meeting management askedstockholders to write any questions they might have concerning thefirm’s operations or finances. As assistant controller, you aregiven the stockholders’ questions.

I heard someone say that stock dividends don’t give meanything I didn’t already have. Why did you issue one? Are youtrying to fool us?