The stockholders' equity section of the balance sheet of the XYZ Corp. is as follows:
$\begin{array}{lr}
Common ~stock~ (\$6par)&\$ 24,000,000 \
Retained~ earnings&\$ 125,000,00 C \
\hline Total&\$ 149,000,00 C\
\hline
\end{array}$
If the company now splits its stock 3-for-1, which of the following is correct?

Question

The stockholders' equity section of the balance sheet of the XYZ Corp. is as follows:
$\begin{array}{lr}
Common ~stock~ (\$6par)&\$  24,000,000 \
Retained~ earnings&\$  125,000,00 C \
\hline Total&\$  149,000,00 C\
\hline 
\end{array}$
If the company now splits its stock 3-for-1, which of the following is correct?

Quizplus · Accepted Answer

In a 3-for-1 stock split, the number of shares increases by a factor of three, while the par value per share is divided by three. Therefore, if the original par value was $6, after the split, it would be $6 divided by 3, which equals $2.00.

The Stockholders' Equity Section of the Balance Sheet of the XYZ