At December 31, 2019, Bailey Corporation had 40,000 shares outstanding of $15 par value common stock. The shares were originally issued for $42 per share. On January 1, 2020, Bailey split its common stock 3 for 1 with a corresponding reduction in the stock's par value. The market price of the stock just before the split was $75 per share.
After the split, the balance in the common stock account is:

Question

Quizplus · Accepted Answer

The balance in the common stock account after the stock split would still be $600,000. Stock splits do not change the total par value of the stock issued; they only change the number of shares and the par value per share. Before the split, there were 40,000 shares at a $15 par value, totaling $600,000 (40,000 shares * $15 par value). After a 3 for 1 split, the number of shares increases to 120,000 (40,000 * 3), and the par value per share decreases to $5 ($15 / 3), but the total par value remains the same at $600,000.

At December 31, 2019, Bailey Corporation Had 40,000 Shares Outstanding