h. Schroeder Company had 200,000 shares of common stock outstanding with a $2 pa

Q: h. Schroeder Company had 200,000 shares of common stock outstanding with a $2 pa

Solution: After stock split of 2 for 1, number of outstanding common shares = 200,000*2 = 400,000 shares of common stock. From the stock split, retained earnings are not effected but common shares will become 400,000 and par value will be $1 per share. Hence A total of 400,000 shares of common Stock will be outstanding as a result of 2 for 1 stock split. Hence Option 2 is correct.

ID: 2400099 • Letter: H

Question

h. Schroeder Company had 200,000 shares of common stock outstanding with a $2 par value and retained earnings of $90,000. In 2010, earnings per share were $0.50. In 2011, the company split the stock 2 for 1. Which of the following would result from the stock split?

1. Retained earnings will decrease as a result of the stock split.

2. A total of 400,000 shares of common stock will be outstanding.

3. The par value would become $4 par. 4.

Retained earnings will increase as a result of the stock split.

5. None of the above.

Explanation / Answer

Solution:

After stock split of 2 for 1, number of outstanding common shares = 200,000*2 = 400,000 shares of common stock.

From the stock split, retained earnings are not effected but common shares will become 400,000 and par value will be $1 per share.

Hence A total of 400,000 shares of common Stock will be outstanding as a result of 2 for 1 stock split.

Hence Option 2 is correct.

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h. Schroeder Company had 200,000 shares of common stock outstanding with a $2 pa

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