A company had 300,000 shares of $10 par value common stock outstanding. The amount of Additional paid-in capital is $1,500,000, and retained earnings is $450,000. The company issues a 2-for-1 stock split. The market price of the stock is $13. What is the balance in the common stock account after this issuance?
A) $6,000,000
B) $6,900,000
C) $3,000,000
D) $4,500,000

Question

Quizplus · Accepted Answer

A 2-for-1 stock split doubles the number of shares and halves the par value per share. The original par value was $10, so after the split, it becomes $5. The original number of shares was 300,000, so after the split, it becomes 600,000 shares. The balance in the common stock account is calculated as the number of shares multiplied by the new par value: 600,000 shares * $5 = $3,000,000.

A Company Had 300,000 Shares of $10 Par Value Common