Question

On September 1, Ziegler Corporation had 63,000 shares of $5 par value common stock, and $189,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:_________
a. Debit Retained Earnings $945,000; credit Common Stock $945,000.
b. Debit Retained Earnings $315,000; credit Common Stock $315,000.
c. Debit Retained Earnings $315,000; credit Stock Split Payable $315,000.
d. Debit Retained Earnings $945,000; credit Common Stock Split Distributable $945,000.
e. No entry is made for this transaction.

Answer 1

Answer:

e. No entry is made for this transaction.

Explanation:

When a corporation splits stocks it doesn't have to record any type of journal entry. This happens because no account balance actually changes, only the total number of stocks outstanding and the par value per stock will change. But the balance of the common stocks account will be the same.

This type of transactions are recorded in the footnotes or in a memo entry in the financial statements, but no journal entry.