Question

on december 1, a company had 40,000 shares of $2 par value common stock outstanding before it declared a 2-for-1 stock split. before the split, the stock had a market value of $50 per share. After the split, how many shares of common stock are outstanding and what is their par value per share?

Answer 1

After the 2-for-1 stock split, the company will have 80,000 shares outstanding at a reduced par value of $1 per share, with each original share now becoming two shares.

Step-by-step explanation:

On December 1, a company that had 40,000 shares of $2 par value common stock declared a 2-for-1 stock split. Initially, the stock had a market value of $50 per share.

After the stock split, the number of shares will double to 80,000 shares, and the par value per share will be reduced by half to $1 per share, because in a typical stock split, the total par value remains the same but is distributed over more shares.

To determine the number of shares of common stock outstanding after the 2-for-1 stock split, we need to divide the initial number of shares by the split factor of 2. Therefore, the number of shares after the split is 40,000 / 2 = 20,000 shares.

The par value per share remains the same after the stock split. Therefore, the par value per share is still $2.