Question

On September 1, a corporation with 50,000 shares of $5 par value common stock and $1,000,000 of Retained Earnings issues a 2-for-1 stock split. The market price of the stock on that date is $12 per share. Which of the following statements is correct concerning this stock split?

A) Contributed capital will increase by $250,000.

B) Retained Earnings will decrease by $600,000.

C) Dividends payable will increase by 250,000.

D) No entry will be made for this transaction.

Answer

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