At the Time That Kirby Company Issued a 2-For-1 Stock

question 112

Multiple Choice

At the time that Kirby Company issued a 2-for-1 stock split, the company had 5,000 shares of $6 par value common stock outstanding. Stockholders' equity also contained $15,000 of additional paid-in capital and $22,000 of retained earnings. Immediately after the stock split the:

• A) balance in the common stock account would amount to $30,000.
• B) amount of paid-in capital in excess of par-common would be equal to $150,000.
• C) balance in the retained earnings account would amount to $11,000.
• D) number of outstanding shares of common stock would be 2,500.

---

Definitions:

Net Income

The amount of profit remaining in a company after all expenses, taxes, and costs have been subtracted from total revenue.

Accrual-Based Net Income

The net income of a company calculated based on accrual accounting, recognizing revenues when earned and expenses when incurred, regardless of cash flow.

IntrA-Entity Gains

Profits resulting from transactions within the same entity, often requiring elimination during the consolidation process to avoid inflating earnings.

Initial Value Method

An accounting method where an investment is recorded at its acquisition cost without subsequent adjustment for changes in market value.