Asked by Jonnel Young on May 11, 2024
Verified
The declaration and distribution of a 2-for-1 stock split results in a reduction of retained earnings.
Stock Split
An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares, though the overall value of the shares remains the same.
Retained Earnings
Cumulative earnings of a company that are not distributed to the owners and are reinvested in the business.
2-for-1
Describes a type of stock split where a company divides its existing stock into two shares, effectively doubling the number of shares owned by shareholders but potentially halving the price per share.
- Identify the treatment of stock dividends and stock splits in accounting.
Verified Answer
Learning Objectives
- Identify the treatment of stock dividends and stock splits in accounting.
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