The Retail Outlet has 6,000 shares of stock outstanding with a book value of $1.00 per share. The current market value of the ﬁrm is $420,000. The balance sheet shows retained earnings of
$234,000. The company just announced a 2-for-1 stock split. What will the common stock account
Balance be after the split?

Question

Quizplus · Accepted Answer

After the 2-for-1 stock split, the number of outstanding shares will double to 12,000 shares (6,000 x 2). However, the book value per share will be halved to $0.50 per share. The market value per share will also be halved to an unknown value since it is not provided in the question.

To find the new common stock account balance, we can use the formula:
Common Stock = Number of Shares x Book Value per Share

Using the information provided in the question, we can calculate the current common stock account balance:
Common Stock = 6,000 x $1.00 = $6,000

After the stock split, the new common stock account balance will be:
Common Stock = 12,000 x $0.50 = $6,000

Therefore, the answer is C) $6,000.

The Retail Outlet Has 6,000 Shares of Stock Outstanding with a Book