The market value of Lan Corporations common stock had become excessively high. The stock was currently selling

Question:

The market value of Lan Corporation’s common stock had become excessively high. The stock was currently selling for $160 per share. To reduce the market price of the common stock, Lan declared a 2-for-1 stock split for the 400,000 outstanding shares of its $10 par common stock.

Required

a. How will Lan Corporation’s books be affected by the stock split?

b. Determine the number of common shares outstanding and the par value after the split.

c. Explain how the market value of the stock will be affected by the stock split.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...