On September 1, 2019, Nichole Company's balance sheet indicates there are 1,800,000 shares of $60 par value common shares in the Common Stock account and $1,350,000 in the Additional Paid-in Capital account. There are 3,000,000 shares authorized. On September 2, Nichole splits its stock 2 for 1. How many shares of Nichole common stock are issued and outstanding immediately after the stock split? a. 4,200,000
b. 12,000,000
c. 3,600,000
d. 900,000

The correct option is c. 3,600,000.

Explanation:

A stock split occurs when the board of directors of a company have taken a decision to increase the number of shares outstanding by issuing more shares to current shareholders.

Since Nichole splits its stock 2 for 1, it implies that an additional share is issued for each share held by a shareholder.

Therefore, the number of its common stock issued and outstanding immediately after the stock split can be calculated as follows:

Number common stock after the stock split = Number of in the Common Stock account + Additional share issued (1)

Where;

Number of in the Common Stock account = 1,800,000

Additional share issued = 1,800,000

Substituting the value into equation (1), we have:

Number common stock after the stock split = 1,800,000 + 1,800,000 = 3,600,000

Therefore, the number of its common stock issued and outstanding immediately after the stock split is 3,600,000 shares. Therefore, the correct option is c. 3,600,000.

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