On December 1, Murial Ltd. declared a 2 for 1 stock split when the market value was $40 per share. Prior to the split, there were 200,000 shares issued and outstanding. After the stock split, the number of shares outstanding and the share capital balance were Shares Capital
A) 200,000 $8,000,000.
B) 200,000 $4,000,000.
C) 400,000 $8,000,000.
D) 400,000 $4,000,000.

Question

Quizplus · Accepted Answer

A 2 for 1 stock split means that each existing share is split into two new shares. Therefore, the number of shares outstanding will double. The share capital balance will also double, as each new share will have a par value that is half of the par value of the old shares.