Robinson's has 30,000 shares of stock outstanding with a par value of $1 per share and a market price of $44 a share. The balance sheet shows $30,000 in the common stock account, $440,000 in the paid in surplus account, and $380,000 in the retained earnings account. The firm just announced a 5-for-3 stock split. How many shares of stock will be outstanding after the split

The question has the following multiple choices:

Multiple Choice  

18,000 shares

50,000 shares

120,000 shares

32,000 shares  

49,500 shares

The correct option is 50,000 shares as shown below

Explanation:

Number of shares after stock-split=number of shares before stock split*stock split ratio

number of shares before stock split=30,000

stock-split ratio is 5/3

Number of shares after stock-split=30,000*5/3

                                                         =50,000 shares

Stock-split is an approach where a company further split its existing shares into multiples of shares in order to make the share more affordable to investors, even though the number of shares increases with a stock-split,but the actual monetary value of the shares remains the same.

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