A 2-For-1 Stock Split

question 58

Multiple Choice

A 2-for-1 stock split:

• A)Is accounted for in the same way as a 100% stock dividend.
• B)Increases the number of outstanding shares of common stock,but par value per share remains the same as before the split.
• C)Is recorded by transferring the par value of additional shares from retained earnings to the common stock account.
• D)Should logically cause the market price per share to drop by approximately 50%.

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Definitions:

Disposable Income

The amount of money a household has available for spending and saving after income taxes have been accounted for.

Consumption Function

A macroeconomic concept that describes the relationship between total consumption and gross national income.

Consumption Function

An economic formula that represents the relationship between total consumer spending and total national income.

Household Wealth

The total value of all financial and non-financial assets owned by members of a household minus any liabilities.