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 contributed capital.
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 $.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.