A Company Has 10 Million Common Shares Authorized and 2

Multiple Choice

A company has 10 million common shares authorized and 2.5 million shares issued.The par value is $1 per share and the market price is $30 when the company declares a 4-for-1 stock split.Which of the following is correct?

A) There will be a transfer of $2.5 million from retained earnings to the common stock account.
B) For every one share of stock owned,a shareholder will receive four shares and will now own 5 shares of stock.
C) The shares issued and outstanding will all quadruple while the par value will be reduced to $0.25 per share.
D) The company will be unable to declare a 4-for-1 split because it does not have enough authorized shares to issue the split.