Stock Split
True or False: No formal journal entry is needed for a stock split.
True
What is a change in accounting principle?
when a business changes to a different generally accepted accounting principles (GAAP) or changes the method with which a principle is applied.
True or False: A stock split gives shareholders more shares based on their ownership percentage
True
what does FASB stand for?
Financial Accounting Standards Board
What does stock split not affect?
A stock split does not affect total share capital, retained earnings, or shareholders’ equity.
Name one of the two examples of a change in accounting principle mentioned?
from straight line depreciation to double declining or from FIFO to AVCO
What happens when there is a 2 to 1 split
Investors will now hold two shares for every share owned.
The number of outstanding share will double and the book value will be decreased in half.
What 3 things must a company disclose when changing account principles?
The company must disclose the nature of the change, the reason for it, and its effect on the financial statements.
How is a stock split different from a stock dividend?
Stock Split is based on ownership percentages for more shares, it increases number of authorized and outstanding shares and it reduces book value.
What needs to be applied when a change in accounting principle happens?
Retrospective Application