Asked by: Yailen Mihalushkinasked in category: General Last Updated: 16th April, 2020
What is the effect of a stock split in the balance sheet?
In respect to this, what is the effect of a stock split on assets?
When a stock splits, it has no effect on stockholders’ equity. During a stock split, the company does not receive any additional money for the shares that are created. If a company simply issued new shares it would receive money for these, which would increase stockholders’ equity.
Also, why would you split a stock? A stock split is a corporate action in which a company divides its existing shares into multiple shares. Basically, companies choose to split their shares so they can lower the trading price of their stock to a range deemed comfortable by most investors and increase liquidity of the shares.
In this manner, how do you record a stock split?
The only journal entry needed for a stock split is a memo entry to note that the number of shares has changed and that the par value per share has changed (if the stock has a par value).
Should I hold through a reverse split?
Investors who own a stock that splits may not make a lot of immediate money, but they shouldn’t sell the stock since the split is likely a positive. A reverse split works the opposite way. Those two $5 bills would become one $10 bill. Reverse splits should be met with skepticism.