Asked by João Victor on May 16, 2024
Verified
The Mining Co. has 110,000 shares of stock outstanding. The current market value of the firm is $5.5 million. The company has retained earnings of $1.8 million, paid in surplus of $2.2 million, and a common stock account value of $.11 million. The company is planning a 5-for-1 stock split. What will the retained earnings account value be after the split?
A) $0.36 million
B) $0.45 million
C) $1.8 million
D) $7.2 million
E) $9.0 million
Stock Split
An increase in a firm’s shares outstanding without any change in owner’s equity.
Retained Earnings
Profit that is not distributed to the shareholders but is kept by the company for future investment or to pay off debt.
- Evaluate the fiscal effects of specific organizational actions, encompassing the splitting of shares and modifications in dividend policies.
Verified Answer
DP
Daieyshia PruittMay 19, 2024
Final Answer :
C
Explanation :
Retained earnings are not affected by a stock split. The value remains the same before and after the split, which is $1.8 million in this case.
Learning Objectives
- Evaluate the fiscal effects of specific organizational actions, encompassing the splitting of shares and modifications in dividend policies.
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