Question

Robinson's has 42,000 shares of stock outstanding with a par value of $1 per share and a market price of $42 a share. The balance sheet shows $42,000 in the common stock account, $490,000 in the paid in surplus account, and $480,000 in the retained earnings account. The firm just announced a 3-for-1 stock split. How many shares of stock will be outstanding after the split?

Answer 1

126,000 shares

Step-by-step explanation:

Stock split is a method used to increase the number of shares in an organization without a change on the company's owners equity or market value , but cause a decrease to the market price of the shares which in return attracts investors.

No of shares stock = 42000

New offer = 3-for 1

Stock outstanding after split=

3/1*42000

=126,000 shares