Council Crest,Inc.had 20,000 shares issued and outstanding of its $.50 par value common stock.At December 31,Common Stock equaled $10,000,Retained Earnings equaled $20,000 and Total stockholders' equity equaled $50,000 prior to a 2-for-1 stock split.As a result of a 2-for-1 stock split:

Question

Quizplus · Accepted Answer

If a company with 20,000 shares outstanding executes a 2-for-1 stock split,it reduces the per-share par value of its stock from $.50 to $0.25 and doubles the number of shares outstanding from 20,000 to 40,000.The decrease in par value per share offsets the increase in the number of shares,so the financial position of the company is not affected and no journal entry is needed.