Joe Carry-out Coffee began the year with $89,000 in retained earnings, and 61,000 shares of $0.50 par value common stock originally issued at $10 per share. The board of directors declared $24,000 of cash dividends on June 30. On July 1, Joe Carry-out declared a forward 2-for-1 stock split. The market price of the Joe Carry-Out stock was $12.50 just before the split. Which of the following is one effect on the day the stock split occurs?
Retained earnings declines by $750,000.
Common stock increases by $30,500.
Total shareholders’ equity increases by $30,500.
The market price of the stock declines to $6.25.