Question

Deimos Corporation has 500,000 shares of $2 par-value common stock issued and outstanding when the market price per share is $22 per share. By what amount will total equity increase when the company declares a 2:1 stock split

Answer 1

Answer:

Total equity will remain the same

Explanation:

A stock split is simply increasing the number of shares and at the same time reducing the par value per share.

A stock split of 2:1 means that the number of shares would double  while par value reduces by half.Specifically,the number of shares would increase  from 500,000 to 1,000,000 while the par value reduces from $2 per share 1/2*$2 i.e $1 each.

All in all,the there is no increase in total equity overall.