Question

Which of the following statements is true concerning stock splits? a.The total number of shares outstanding does not change after the stock split. b.Each shareholder will own the same total par amount of stock before and after the split. c.Stock splits require journal entries to be recorded. d.None of these choices are correct.

Answer 1

Answer:

d.None of these choices are correct.

Explanation:

The stock split is the way to increase the outstanding number of shares.  

Take an example

The current shares are 50,000 and the stock split ratio is 2 for 1 share

So, now the new shares are  

= 50,000 × 2

= 100,000 shares

The first statement is false as it changes the outstanding shares after the stock split.  

The second statement is also incorrect because the par amount is also changed

And, the third statement is also incorrect because no journal entry is required for the stock split