Question

Paiva Corporation splits its common stock 2 for 1, when the market value is $80 per share. Prior to the split, Paiva had 100,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock a.is reduced to $5 per sthare. b.is reduced to $2 per share c.is reduced to $20 per share d.remans the same

Answer 1

Answer:

a. is reduced to $5 per share

Explanation:

Data given in the question

Market value per share = $80

Number of shares = 100,000

Par value = $10

So, after the split, the par value of the stock is

= Par value of the stock ÷ stock split ratio

= $10 ÷ 2

= $5 per share

By dividing the par value of the stock by the stock split ratio we can get the par value of the stock