Question

All of these are true regarding stock splits, except:

a. Stock splits are not recorded in accounts.
b. Stock splits do not affect the stockholders' equity accounts.
c. Stock splits reduce the par value per share.
d. Stock splits are not disclosed in notes.

Answer 1

Stock splits reduce par value per share and are disclosed in notes, but they do not affect stockholder's equity or get recorded in accounts.

Step-by-step explanation:

The question is regarding the characteristics of stock splits. During stock splits, all of the following statements are true except one. Stock splits indeed are not recorded in accounts, they do not affect the stockholders' equity accounts, and they do reduce the par value per share. However, statement 'd' is incorrect because stock splits are disclosed in the notes to financial statements. This is important because although stock splits change the number of shares outstanding and the par value per share, they do not change the overall market value of all shares combined or the equity of the company pre-and post-split.