Asked by zeina mahmoud on May 05, 2024
Verified
Prezario's has 225,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the firm is $1,690,000. The company just announced a 2-for-1 stock split. By how much does the common stock account balance change after the split?
A) -$5,000
B) -$4,000
C) $0
D) $4,000
E) $5,000
Par Value
The face value of a bond or the stock value stated in the corporate charter, which may differ from the market value.
Stock Split
A corporate action where a company divides its existing shares into multiple new shares to boost the liquidity of the shares, though the overall value of the company remains unchanged.
Market Value
The existing rate at which an asset or service is being offered for buying or selling in the marketplace.
- Analyze the impact of stock splits and stock dividends on company's equity and per-share values.
Verified Answer
ZK
Zybrea KnightMay 06, 2024
Final Answer :
C
Explanation :
The common stock account balance is determined by the par value per share multiplied by the number of shares outstanding. A stock split increases the number of shares but does not change the total par value of the stock outstanding. Therefore, the common stock account balance remains unchanged.
Learning Objectives
- Analyze the impact of stock splits and stock dividends on company's equity and per-share values.