ABC Inc. has 1 million shares of common stock outstanding ($10 par value), paid-in surplus of $10 million, and retained earnings of $10 million. If ABC stock is trading at $20 per share, what would be the effect of a 2-1 stock split?

ABC Inc. has 1 million shares of common stock outstanding ($10 par value), paid-in surplus of $10 million, and retained earnings of $10 million. If ABC stock is trading at $20 per share, what would be the effect of a 2-1 stock split?

ABC Inc. has 1 million shares of common stock outstanding ($10 par value), paid-in surplus of $10 million, and retained earnings of $10 million. If ABC stock is trading at $20 per share, what would be the effect of a 2-1 stock split?


A) The retained earnings would be decreased by $10 million.

B) The number of shares outstanding would decrease by 50%.

C) The market price of the stock would double.

D) The par value would decrease to $5 per share.


Answer: D) The par value would decrease to $5 per share.


Learn More :