Final answer:
In the case of Siewert Inc.'s 2-for-1 stock split on its common shares, no journal entry is required because the stock split is not effected in the form of a stock dividend. Accounting for a stock split involves changing the number of shares and par value per share but the total par value remains the same.
Step-by-step explanation:
The student asked a question about how to record a journal entry for a 2-for-1 stock split effected by Siewert Inc. on its 150 million, $1 par common shares. In this case, since the stock split is not being effected in the form of a stock dividend, there would be no need for a journal entry on the date of the declaration. In accounting for a stock split, no change occurs in the total par value or the total equity; instead, the number of shares outstanding is increased and the par value per share is proportionally decreased. After the split, each share has a par value of $0.50 with 300 million shares outstanding, but the total par value remains $150 million. Stock splits are designed to increase the liquidity of the shares by making them more affordable to small investors, potentially leading to capital gains as the value of the stock might increase over time due to increased marketability and accessibility.
If a journal entry had been required, it would involve only the equity accounts—debiting retained earnings and crediting common stock, no par value—or common stock, par value, depending on the company's accounting treatment for stock splits. However, since no value is being transferred to or from the company in a stock split, only the number of shares and the face value per share change.