medium · Financial Accounting stockholders-equity
A firm conducts a 2-for-1 stock split when its shares have a par value of 0.01 and there are 1 million shares outstanding.
What is the impact on the Common Stock (at par) and Retained Earnings accounts?
- Both accounts increase to reflect the firm's higher market capitalization.
- Common Stock increases by $10,000 while Retained Earnings decreases by $10,000.
- Common Stock simply doubles to 20,000 while Retained Earnings remains completely unchanged.
- There is no change to the total balance of either Common Stock or Retained Earnings.
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