Question

ASP Corporation has 30,000 shares of $2 par value common stock outstanding. On January 5, ASP declares a 2 for 1 stock split. What is the total value in common stock after the stock split?

		$60,000
		$120,000
		$240,000
		$30,000

Answer 1

Total value in common stock after stock split -

$ 60,000

Explanation -

Stock split in which company divides its existing no. of shares into mutliple shares to boost the liquidity of shares. In it no of shares will increased and face value of shares decreased.

2 for 1 stock split means that the shareholder will have 2 shares for every share already held.

As the stock split will increase the no of shares and decrease face value but the total common stock value will remain same. As in the given case, the new share capital will be

No of shares = 30,000 × 2 = 60,000

Share price = $ 1

Total share value = $1 × 60,000 = $ 60,000.