From an accounting standpoint, stock splits are accomplished by ____.
A) increasing the number of shares authorized
B) increasing par value of existing shares
C) reducing the par value of existing shares
D) reducing the number of shares and increasing the price of each share

Question

Quizplus · Accepted Answer

Stock splits involve reducing the par value of existing shares to increase the number of shares outstanding. This process does not affect the company's financial position or its value, but simply makes shares more affordable for investors by splitting one share into multiple shares. Increasing the number of shares authorized or reducing the number of shares and increasing the price of each share are not accounting treatments for a stock split. Increasing the par value of existing shares would have the opposite effect of a stock split, as it would decrease the number of shares outstanding while increasing their value.

From an Accounting Standpoint, Stock Splits Are Accomplished by ____