On June 6th, 2014 Apple Inc. declared a 7-for-1 stock split for the 861.38 milli

Question

On June 6th, 2014 Apple Inc. declared a 7-for-1 stock split for the 861.38 million outstanding shares of its $0.00007 par common stock. What was an accounting effect? New shares outstanding=861.38 mln x7=6029.66 mln (about 6bln). The pie of shares was the same before and after split, but the company now has 6bln “slices” instead of 861 mln “slices”. From accounting standpoint, there was no need to do adjustment to Common Stock or Paid-in Capital. Thus, Total Equity after the split stayed the same
Par value after the split 0.00001Calculated as follow: 0.00007/7=0.00001.

Reason for split: Apple stated that it executed this 7-for-1 stock split because it wanted to make its shares available to more investors. Due to the split, the market price per share went from about $650 per share down to about $94 per share, making the stock affordable for more people.
Suppose, that your dearest grandma knowing your passion for technology instead of buying you another “toy” (New Ipad) bought you one Apple share as a Christmas present in 2013.

1.After the stock split, you are now owner of a ____________part of the Apple company. To put it differently, was your ownership stake diluted as a result of the stock split?

Explanation / Answer

1.After the stock split, you are now owner of a same part of the Apple company.

The reason is as the share capital is increased by 7 times, your sharehldomg is also increased by 7 times, so there is no difference in percentage of share holding.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.