A company had 2,000,000 shares of $10 par value common stock outstanding. The am

Question

A company had 2,000,000 shares of $10 par value common stock outstanding. The amount of additional paid-in capital is $10,000,000, and Retained Earnings is $3,000,000. The company issues a 2-for-1 stock split. The market price of the stock is $14. What is the balance in the Common Stock account after this issuance?

A) $48,000,000

B) $30,000,000

C) $40,000,000

D) $20,000,000

A company had 2,000,000 shares of $10 par value common stock outstanding. The amount of additional paid-in capital is $10,000,000, and Retained Earnings is $3,000,000. The company issues a 2-for-1 stock split. The market price of the stock is $14. What is the balance in the Common Stock account after this issuance?

Explanation / Answer

the balance in common stock account after stock split will remain same because in stock split number of shares will increase but par value decreased so that total stock value remain same.

in given question , number of stock after stock split= 2000000 * 2/1

= 4000000

par value after stock split= 10/2

= $5

Total value = 4000000*5

=$20000000

so option (d) is correct.

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