The balance of the $0.50 par value Common Stock account for Murdock Company was $60,000 before its recent 3-for-1 stock split.The market price of the stock was $30 per share before the stock split.What occurred as a result of the stock split?
A) The balance in the Retained Earnings account decreased.
B) The balance in the Common Stock account declined to $20,000.
C) The market price of the stock was not affected.
D) The market price of the stock dropped to approximately $10 per share.

Question

Quizplus · Accepted Answer

A stock split increases the number of shares outstanding and decreases the price per share without affecting the total market value of the shares outstanding. In this case, a 3-for-1 stock split would likely reduce the market price per share to approximately $10, assuming market conditions remain constant. The balance in the Common Stock account remains unchanged because a stock split does not affect the par value or the total par value of shares outstanding; it merely increases the number of shares while reducing the price per share accordingly.

The Balance of the $0