After the stock split, the number of shares outstanding, their par value and the total common stock account will stand at
A) 2,000,000; $4.00; $8,000,000.
B) 500,000; $8.00; $4,000,000.
C) 2,000,000; $2.00; $4,000,000.
D) 500,000; $2.00, $2,000,000.

Question

Quizplus · Accepted Answer

A stock split increases the number of shares outstanding and reduces the par value per share. In this case, the split is 2-for-1, which means that each share will be split into two shares, effectively doubling the number of shares outstanding. Additionally, the par value will be reduced by half.

Before the split, there are 1,000,000 shares outstanding with a par value of $4.00 per share, which gives a total common stock account of $4,000,000 (1,000,000 x $4.00).

After the split, there will be 2,000,000 shares outstanding with a par value of $2.00 per share. The total common stock account will remain the same because the increase in shares is offset by the decrease in par value. Therefore, the answer is C: 2,000,000; $2.00; $4,000,000.

After the Stock Split, the Number of Shares Outstanding, Their