The shareholders' equity section of the balance sheet of the XYZ Corp. is as follows: $\begin{array}{ll}
\text { Common stock } & \$ 20,000,000 \
\text { Retained earnings } & \$ 176,000,000 \
\text { Total } & \$ 196,000,000
\end{array}$
If the company now splits its stock 5-for-1, which of the following is correct?

Question

The shareholders' equity section of the balance sheet of the XYZ Corp. is as follows: $\begin{array}{ll}
\text { Common stock } & \$ 20,000,000 \
\text { Retained earnings } & \$ 176,000,000 \
\text { Total } & \$ 196,000,000
\end{array}$ 
If the company now splits its stock 5-for-1, which of the following is correct?

Quizplus · Accepted Answer

A stock split increases the number of shares outstanding while reducing the price per share, but it does not change the total value of common stock or retained earnings.

The Shareholders' Equity Section of the Balance Sheet of the XYZ