How did Apple’s 7-for-1 stock split affect its total stockholders’ equity?

In June 2014, Apple, Inc. (AAPL) did a 7-for-1 stock split, meaning that an investor who previously held one share of Apple stock would have seven shares on the date of the split.  Before the split, Apple had 861 million shares of stock valued at roughly $650 each.  After the split, Apple had approximately 6 billion shares valued at roughly $94 per share.  (The total market value of Apple’s stock increased on the date of the stock split due to market fluctuation; the stock split had no immediate impact on the value of Apple.)

Apple stated that it executed this 7-for-1 stock split because it wanted to make its shares available to more investors.  Due to the split, the market price per share would go from about $650 per share down to about $94 per share, making the stock affordable for more people.

The par value of Apple’s common stock is $0.00001 per share as of September 27, 2014 (Apple’s year end.)

Apple has split its stock four times since it began operations.  Three times, Apple has conducted a two-for-one stock split (in 1987, 2000, and 2005.)  If you had purchased one share of Apple stock at its original issuance on December 12, 1980 ($22 per share market price), you would have 56 shares today.

Questions

1. What impact does the stock split have on Apple’s total stockholders’ equity?
2. What impact does a stock split have on a stock’s par value? Explain.
3. Has the par value of one share of Apple stock changed since it was originally issued in 1980? Explain.

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

• Student handout (pdf) (word) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)

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