On September 1,a corporation with 50,000 shares of $5 par value common stock and $1,000,000 of retained earnings issues a 2-for-1 stock split.The market price of the stock on that date is $12 per share.Which of the following statements is true concerning this stock split?

Question

Quizplus · Accepted Answer

No entry will be made for this transaction because a stock split does not affect the total equity or the value of the corporation. The number of shares increases while the par value per share decreases, resulting in no net change in the total equity. Therefore, neither contributed capital nor retained earnings is affected by a stock split, and dividends payable will not increase.

On September 1,a Corporation with 50,000 Shares of $5 Par