Asked by Jasmine Nacole on Apr 24, 2024
Down River Express has 5,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the firm is $390,000. The balance sheet shows a paid in surplus account value of $122,000 and retained earnings of $216,000. The company just announced a 2-for-1 stock split. What will the paid in surplus account balance be after the split?
A) $61,000
B) $112,000
C) $122,000
D) $183,000
E) $244,000
Stock Split
A corporate action that increases the number of shares outstanding, reducing the price per share without changing the company's market capitalization.
Paid in Surplus
The amount of money paid to a company by investors in exchange for stock, beyond the par value of the stock.
Par Value
The face value of a bond or stock, as determined at the time of issuance.
- Explore the effects that stock splits and stock dividends exert on the equity and per-share valuation of a company.
Learning Objectives
- Explore the effects that stock splits and stock dividends exert on the equity and per-share valuation of a company.