=+One way to lower the market price of a firm’s stock is via a stock split. Rock-O Corporation finds itself in a different situation: Its stock has been selling at relatively low prices. To increase the market price of the stock, the company chooses to use a reverse stock split of 2-for-3.

The company currently has 700,000 common shares outstanding and no preferred stock. The common stock carries a par value of $1. At this time, the paid-in capital in excess of par is $7,000,000, and the firm’s retained earnings are $3,500,000.