Kelso's balance sheet shows $15,000 in the common stock account,$315,000 in the capital in excess of par account,and $189,000 in the retained earnings account.The firm just announced a 3-for-2 stock split.What will be the value of the common stock account after the split if the par value per share is $1?

Question

Quizplus · Accepted Answer

Before the split, the total value of common stock and capital in excess of par was $330,000 ($15,000 + $315,000). After the split, the number of shares will increase by 50% (3-for-2), so the total value of common stock and capital in excess of par will still be $330,000. Since the par value per share is now $0.67 ($1 / 1.5), the number of shares will increase to 22,388 ($15,000 / $0.67), and the value of the common stock account will be $15,000.

Kelso's Balance Sheet Shows $15,000 in the Common Stock Account,$315,000