Question

ABC Corporation offered a four-for-one stock split. The number of outstanding shares before the split was 15,000, and the par value was $20 per share. After the split, what was the par value and number of shares?
A. 3,750 shares at $5 per share
B. 3,750 shares at $80 per share
C. 60,000 shares at $80 per share
D. 60,000 shares at $5 per share

Answer 1

Answer: D. 60,000 shares at $5 per share

Explanation:

The company has 15,000 shares and offers to split the stock four-for-one. It means that the there will be four times the number of shares but the total value of the shares, before and after the split, would remain the same.

The total value of shares = $15,000 x 20 = $300,000

Since the stock split is 4-for-1, the number of shares would be = 15000 x 4

= 60,000 shares

Therefore the total value of shares divided by the number of shares will give us the par value of the shares:

300,000 / 60,000 = $5

Answer 2

D. 60,000 shares at $5 per share