AFM123 Study Guide - Retained Earnings
Get access
Related Documents
Related Questions
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?