Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Stock Splits

Financial Accounting

12. Stockholders' Equity

Stock Splits

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Multiple Choice

Which of the following statements is NOT true about a 3-for-1 stock split?

Each shareholder owns three times as many shares after the split.

The par value per share is reduced to one-third of its original amount.

The number of shares outstanding triples.

The total stockholders' equity increases as a result of the split.

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Verified step by step guidance

Understand the concept of a stock split: A stock split increases the number of shares outstanding while reducing the par value per share proportionally. It does not change the total stockholders' equity because the overall value of the company remains the same.

Analyze the impact of a 3-for-1 stock split: Each shareholder will own three times as many shares, but the value of each share will be reduced to one-third of its original value. This ensures the total value of shares held by each shareholder remains unchanged.

Review the statement 'The par value per share is reduced to one-third of its original amount': This is true because the par value is adjusted proportionally to the increase in the number of shares.

Evaluate the statement 'The number of shares outstanding triples': This is also true because a 3-for-1 stock split triples the number of shares outstanding.

Assess the statement 'The total stockholders' equity increases as a result of the split': This is NOT true because a stock split does not affect the total stockholders' equity. It only redistributes the equity across a larger number of shares without changing the total value.