Question

ROK Corporation's December 31, 2010 balance sheet showed the following:

Preferred Stock - $150,000
Common Stock - $400,000
Paid-in Capital excess of par value - preferred stock - $80,000
Paid-in Capital excess of par value-common stock - $800,000
Retained Earnings - $1,500,000
Treasury stock - $150,000

1. What is the total amount of Paid-in Capital as of December 31?

2.  What is the total amount of Stockholders' Equity as of December 31?

3. Which of the following statements is TRUE regarding a 2-for-1 stock split?

a. Total contributed capital decreases

b. Par value per share will be twice the amount of what it was before the split.

c. A stockholder with ten shares before the split owns twenty shares after the split.

d. The market price of the stock will probably increase.

Answer 1

Stockholders' equity section
Paid in capital
Common stock	400,000
Additional paid in capital - Common stock	800,000
Common stockholders' paid in capital		1,200,000
Preferred stock	150,000
Additional paid in capital - Preferred stock	80,000
Preferred stockholders' paid in capital		230,000
Total paid in capital		1,430,000
Retained earnings		1,500,000
Total		2,930,000
Less: Treasury stock		-150,000
Total stockholders' equity		$2,780,000

1.

The total amount of Paid-in Capital as of December 31 = $1,430,000

2.

The total amount of Stockholders' Equity as of December 31 = $2,780,000

3.

Following statement is true for 2 for 1 stock split:

A stockholder with ten shares before the split owns twenty shares after the split.

Correct option is C.

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