The Shareholders' Equity Section of the Balance Sheet of the XYZ

question 49

Multiple Choice

The shareholders' equity section of the balance sheet of the XYZ Corp.is as follows: $$\begin{array} { l r } \text { Common stock } & \$ 20,000,000 \\\text { Retained earnings } & \$ 176,000,000 \\\text { Total } & \$ 196,000,000\end{array}$$ If the company now splits its stock 5-for-1,which of the following is correct?

• A) The common stock section will increase to $100,000,000.
• B) The market price per share will probably remain unchanged.
• C) The book value per share will decline to $17.60.
• D) The number of shares outstanding will increase.

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Definitions:

Sale Or Return

A commercial arrangement where goods are provided to a buyer or reseller who has the option to return unsold items within a specified period instead of purchasing them.

Accord And Satisfaction

A legal agreement between parties to settle a dispute by agreeing on a payment that is different from the original obligation.

Novation

The process of replacing an obligation to perform with a new obligation or substituting a new party to an agreement.

Anticipatory Repudiation

An assertion or action by a party indicating they will not perform their future obligations under a contract, allowing the other party to treat the contract as breached.