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Testbank Multiple Choice Question 61 A feature common to both stock splits and stock dividends is...

Testbank Multiple Choice Question 61

A feature common to both stock splits and stock dividends is

an increase in total liabilities of a corporation.
a transfer to earned capital of a corporation.
that there is no effect on total stockholders' equity.
a reduction in the contributed capital of a corporation.

Testbank Multiple Choice Question 62

What effect does the issuance of a 2-for-1 stock split have on each of the following?

Par Value per Share

Retained Earnings

Increase

No effect

Decrease

No effect

No effect

No effect

Decrease

Decrease
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Homework Answers

Answer #1

61. Answer: That there is no effect on total stockholders' equity

Explanation:

No increase in total liabilities of a corporation in both stock splits and stock dividends

Transfer to earned capital of a corporation happens in Stock dividends but not in Stock split

An increase in the contributed capital of a corporation in stock dividends. No increase or decrease in stock splits

However,

In both there is no change in total stockholders' Equity because

  • Contributed capital increased by retained decrease in retained earnings in stock dividends &
  • No effect of stockholders equity in stock split

Thus, Option iii is correct.

62. Answer:

Decrease No effect

Explanation:

Par value per share Retained earnings
Decrease No effect

Thus, Option ii is correct and remaining options are incorrect.

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