Use the following information to answer the following question(s).
Your firm is planning a 2 for 1 share split.The market price for the share has been $84.The following table presents the equity portion of your firm's balance sheet before the split.
Common share

-After the share split, the number of shares outstanding, their par value and the total common share account will stand at [blank].
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

Use the following information to answer the following question(s).
Your firm is planning a 2 for 1 share split.The market price for the share has been $84.The following table presents the equity portion of your firm's balance sheet before the split.
Common share
 
-After the share split, the number of shares outstanding, their par value and the total common share account will stand at [blank].
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

Quizplus · Accepted Answer

A 2 for 1 share split means that each existing share will be split into 2 new shares. 
Before the split, there were 500,000 shares outstanding, and after the split, there will be 1,000,000 shares outstanding (500,000 x 2). 
The par value of each share will be halved from $4.00 to $2.00.
Therefore, the total common share account after the split will be $4,000,000 (1,000,000 shares x $2.00 par value per share). 
So, the correct answer is C.

Use the Following Information to Answer the Following Question(s)