The Balance of the $0

question 105

Multiple Choice

The balance of the $0.50 par value Common Stock account for Murdock Company was $60,000 before its recent 3-for-1 stock split.The market price of the stock was $30 per share before the stock split.What occurred as a result of the stock split?

• A) The balance in the Retained Earnings account decreased.
• B) The balance in the Common Stock account declined to $20,000.
• C) The market price of the stock was not affected.
• D) The market price of the stock dropped to approximately $10 per share.

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Definitions:

Unintentionally Biased Estimates

Judgments or projections in financial analysis influenced by unintentional prejudices or statistical biases.

Estimating Errors

Mistakes or inaccuracies in forecasting future values or costs, often leading to deviations from expected outcomes.

Unbiased Managers

Refers to managers who make decisions without prejudice or favoritism, aiming for fairness and objectivity in business operations.

Terminal Value

The estimated value of a business at the end of a specific period, considering all future cash flows discounted back to present value.