Assume that Johnson & Squib have 1,000,000 common sharesoutstanding that have a

Question

Assume that Johnson & Squib have 1,000,000 common sharesoutstanding that have a par value of $3 per share. The stockcurrently sells for $15 per share. Which of the following willresult from a 2 for 1 stock split?
a. A decrease in retained earnings of $1,500,000. b. Market value will increase from $15 per share to $30 pershare. c. Par value will increase from $3 per share to $6 pershare. d. The number of outstanding shares will increase from1,000,000 to 2,000,000. Assume that Johnson & Squib have 1,000,000 common sharesoutstanding that have a par value of $3 per share. The stockcurrently sells for $15 per share. Which of the following willresult from a 2 for 1 stock split?
a. A decrease in retained earnings of $1,500,000. b. Market value will increase from $15 per share to $30 pershare. c. Par value will increase from $3 per share to $6 pershare. d. The number of outstanding shares will increase from1,000,000 to 2,000,000.

Explanation / Answer

Stock Split : 2 for 1 Number of Outstanding Shares = 1,000,000shares After Stock Split the Number of Outstanding Shares = 1,000,000 * 2   = 2,000,000 Thus, Answer is Option (d). The Number of OutstandingShares will increase form 1,000,000 shares to2,000,000 Number of Outstanding Shares = 1,000,000shares After Stock Split the Number of Outstanding Shares = 1,000,000 * 2   = 2,000,000 Thus, Answer is Option (d). The Number of OutstandingShares will increase form 1,000,000 shares to2,000,000

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