The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the firm is $420,000. The balance sheet shows a capital in excess of par account value of $136,000 and retained earnings of $234,000. The company just announced a 2-for-1 stock split. What will the retained earnings account balance be after the split?

Question

Quizplus · Accepted Answer

A stock split does not affect the retained earnings account balance. It only changes the number of shares outstanding and the par value per share. Therefore, the retained earnings will remain at $234,000 after the split.

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