Final answer:
A stock split is a corporate action where a company divides its existing shares into multiple shares but the total value of the investment remains the same. A journal entry is not required to record a stock split, and it does not decrease total stockholders' equity. Instead, the number of shares and the par value of the stock are adjusted on the company's balance sheet.
Step-by-step explanation:
A stock split is a corporate action where a company divides its existing shares into multiple shares. It is usually recorded at market value. For example, if a company decides to implement a 2-for-1 stock split, each shareholder will receive two shares for every one share they previously held, but the total value of their investment remains the same.
A journal entry is not required to record a stock split because it does not involve any cash inflows or outflows. Instead, the number of shares and the par value of the stock are adjusted on the company's balance sheet.
A stock split does not decrease total stockholders' equity. The total value of the company remains the same before and after the split, just divided into a larger number of shares. However, a stock split can potentially increase liquidity and attract more investors.