MCQs – Intermediate Accounting, Thirteenth Edition

multiple_choice_-_intermediate_accounting_thirteenth_edition x

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Biological Processes

Lab 4
Enzymes

54

Lab 4: Enzymes

55

Introduc on

Enzymes are specialized proteins that serve as biological catalysts to decrease the ac va on energy
normally needed for a reac on to occur. This means the reac on rate is up to millions of mes faster
than it would be without the enzyme. Most biochemical reac ons require enzymes for them to occur
at fast enough rates to be useful. Typical nomenclature for enzymes follows the pa ern using the
name of the substrate or the chemical reac on it catalyzes, and ends with “ ase”, e.g. catalase, amyl
ase. (In other words, any me you see a word end in “ase” you know it is an enzyme).

Enzymes are extremely selec ve, and are o en described as having a “lock and key” t (Figure 1).
Their shape determines which substrates they bind and interact with. The ac va on site

Figure 1: The speci city of enzymes is controlled by their lock and key t with a spe
ci c substrate.

Concepts to explore:

Enzymes
Selec vity
Catalysts
Ac va on energy
Ac va on site
Reac on rates

Concepts to explore:

Ac vators
Inhibitors

Lab 4: Enzymes

56

is the pocket where the substrate a aches and where the reac on occurs. A er the enzyme/substrate
complex forms and catalysis occurs, the “new” substrate is released from the ac ve site, and the en
zyme can repeat the process. Enzymes levels are not reduced or altered during the reac on. This
means they are e cient and can be used repeatedly.

Enzymes determine the rate at which the reac on occurs (not how it occurs). Their ac vity is a ected
by temperature, pH, enzyme and substrate concentra on, and other chemicals that may be present
(such as salts, which can change the protein structure).

Varia ons in temperature and alkalinity can change the shape of the proteins, such as enzymes, which
makes them inac ve (they can no longer bind to their substrate). The pH can alter charge of the pro
tein, once again changing its shape and rendering them inac ve.

The concentra ons of both the enzyme and substrate determine the reac on rate (Figure 2). Remem
ber that high reac on rates do not always translate into rapid me of comple on (it also depends on
the amount of substrate!).

Ac vators are chemicals that bind to the ac ve site of the en
zyme and help it to bind to the substrate. They are some mes
called cofactors or organic coenzymes.

Inhibitors are chemicals that interfere with the binding of the
substrate to the enzyme. There are two types:

Figure 2: Substrate Satura on Curve

Many drugs and poisons are en
zyme inhibitors. For example, aspi
rin inhibits an enzyme that leads to

in amma on.

Lab 4: Enzymes

57

Compe ve (can be replaced by the substrate)

Non compe ve (not removed by the substrate)

Normal cellular processes produce toxic substances (waste) such as hydrogen peroxide and free radi
cals that if not eliminated, will kill the cell. Luckily, yeast and other organisms (including humans) have
an enzyme called catalase that breaks down hydrogen peroxide into oxygen and water, both harmless
to cells.

Experiment 1: E ect of enzyme concentra on

Yeast cells contain catalase. The e ect of catalase can be seen when yeast is combined with hydrogen
peroxide (Catalase: 2H2O2 › 2 H2O + O2). In this lab you will examine the e ects of enzyme (catalase)
concentra on based on the amount of oxygen produced.

Procedure

1. Label three test tubes as 1, 2, and 3
with a permanent marker.

2. Fill each tube with 10 mL hydrogen
peroxide.

3. Label three beaker as A, B, and C.

4. Add 1/2 teaspoon yeast (1 g.) to 100
mL of warm water (30 35 °C) in
Beaker A. Mix well by pipe ng.

Materials

Yeast
Measuring Spoon
3 Test tubes
Test tube rack
3 100 mL Beakers
Hydrogen peroxide
10 mL Graduated cylinder

Permanent marker
Ruler
String*
3 Balloons
Watch*
*You must provide

Figure 3: When catalsae is added to hydrogen peroxide, oxy
gen is released.

Lab 4: Enzymes

58

5. Make a serial dilu on of yeast solu on. To do this, measure 10 mL of the yeast solu on from
Beaker A and transfer it to Beaker B. Add 90 mL warm water (30 35 °C) to Beaker B. Mix well
by pipe ng.

6. Measure 10 mL of the yeast solu on from Beaker B and transfer it to Beaker C. Add 90 mL
warm water (30 35 °C) to Beaker C. Mix well by pipe ng.

7. Measure and pour 5 mL from Beaker A into the rst test tube.

8. Quickly a ach a balloon to the top of the test tube so that it will ll with the oxygen produced
by the enzyme reac on. It is important to execute this step quickly so that every bit of gas pro
duced will be captured.

9. Swirl each tube to mix, and wait one minute.

10. A er one minute has passed, wrap the string around the center of the balloon to measure the
circumference. Measure the length of string with a ruler. Record the length in Table 1 below.

11. Repeat step 10 a er two more minutes have passed (three minutes total from the start of the
reac on); and again a er two more minutes have passed ( ve minutes total from the start of
the reac on). Record all data in Table 1.

12. If the reac on has not nished, con nue to monitor how long it takes for the reac on to com
plete, and measure the nal balloon circumference.

13. Repeat steps 7 12 for the remaining test tubes (use beaker B for test tube 2 and beaker C for
test tube 3).

Table 1: E ect of enzyme concentra on on the produc on of gas

Ques ons

1. What is the enzyme in this experiment? What is the substrate?

Tube Amount
of yeast

Circumference

(cm)

A er 1 minute

1 0.05 g

2 0.005 g

3 0.0005 g

Circumference (cm)
A er 3 minutes

Circumference (cm)
A er 5 minutes

Time Required
to Complete

Final
Circumference (cm)

Lab 4: Enzymes

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2. Did you no ce a di erence in the rate of reac on in the tubes with di erent concentra ons of
enzymes? Why or why not?

3. What was the e ect of using less enzyme on your experiment?

4. Do you expect more enzyme ac vity if the substrate concentra on is increased or decreased?
Draw a graph to illustrate this rela onship.

5. Hydrogen peroxide is toxic to cells, yet is a common byproduct of the reac ons that occur in
side the body. How can this compound be changed to become non toxic (Hint: Look at the
chemical formula of hydrogen peroxide)?

Experiment 2: E ect of temperature on enzyme ac vity

This experiment looks at the e ect of temperature on enzyme ac vity.

Procedure

1. With a permanent marker, label the test tubes as 1, 2, 3, and 4. Place the test tubes in the test
tube rack for support.

Materials

Yeast
Measuring spoon
4 Test tubes
40 mL Hydrogen peroxide, H2O2
10 mL Graduated cylinder
4 Balloons
2 Water bath containers*
Pot for boiling water*
Stove top*

Hot Pad*
4 Microwave safe cups*
Permanent marker
Test tube rack
Ruler
String*
Watch*
Thermometer
*You must provide

Lab 4: Enzymes

60

2. Use the 10 mL graduated cylinder to measure and pour 10 mL of hydrogen peroxide into each
test tube.

3. Fill a pot with approximately 2 3 inches of water and place it on the stove (turned to medium
high se ng). The water should come to a boil (approximately 100 °C).

4. While the water is hea ng, place each tube in separate, microwave safe cups (or beakers).

5. Gather two containers that can be used as hot water baths. Each container should be wide
enough to t the cup with the test tube in it.

6. Pour 2 3 cups of water into a microwave safe container and heat the water un l it has reached
approximately 85 °C (use the thermometer to monitor this). Pour this water into the rst hot
water bath.

7. Using a hot pad, pour the boiling water from the stove into the second hot water bath.

8. Immediate place the cup holding test tube 1 into the boiling hot water bath and the cup hold
ing tube 2 into the hot (but not boiling) water bath. Keep test tube 3 at room temperature, and
place the cup with test tube 4 in the refrigerator. You may need to add weight (e.g., coins, mar
bles, rocks, etc.) to the cups going into the water baths to keep them from pping over into the
water.

9. Record the ini al temperatures of each condi on in the table below. Let tubes sit for approxi
mately 15 minutes, and record the nal temperature.

10. A er the elapsed me, remove the tubes from their respec ve environments.

11. Add 1/4 tsp. of yeast to the refrigerated test tube.

12. Quickly a ach a balloon to the top of the test tube so that it lls with the oxygen produced
from the enzyme reac on occurring in the tube. It is important to execute this step quickly so
that every bit of gas produced is captured.

13. Swirl the tube to mix, and wait one minute.

14. A er one minute has passed, wrap the string around the center of the balloon to measure the
circumference. Measure the length of string with a ruler. Record the length in Table 2 below.

15. Repeat step 14 a er two more minutes have passed (three minutes total from the start of the
reac on); and again a er two more minutes have passed ( ve minutes total from the start of
the reac on). Record all data in Table 2.

16. If the reac on has not nished, con nue to monitor how long it takes for the reac on to com
plete, and measure the nal balloon circumference.

17. Repeat steps 11 16 for the remaining three test tubes.

Lab 4: Enzymes

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Table 2: E ect of temperature on the produc on of gas

Ques ons
1. What is the enzyme in this experiment? What is the substrate?

2. How does temperature a ect enzyme func on?

3. Do plants and animals have an enzyme that breaks down hydrogen peroxide? How could you

test this?

4. How did the boiling water a ect the overall reac on?

5. How can enzyme ac vity be increased?

6. Design an experiment to determine the op mal temperature for enzyme func on, complete

with controls. Where would you nd the enzymes for this experiment? What substrate would

you use?

7. Draw a graph of balloon diameter vs. temperature. What is the correla on?

Tube
Ini al

Temp. °C

Circumference
(cm) A er 1
minute

Refrigerator

Room temperature

Hot water (~85 °C)

Boiling Water (~100 °C)

Final
Temp. °C

Circumference
(cm) A er 3
minutes

Circumference
(cm) A er 5
minutes

Final
Circumference

(cm)
Time Required
to Complete

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We have discussed the details of cell structure and cell function, and now we need to look at how work is done in the cells. Each individual cell contains a myriad of different enzymes with many different jobs to do. Interestingly, enzymes are specialized workers who are destined by the DNA of a given cell to perform one specific duty. All cells continually make new enzymes, whenever they are needed. 

Enzymes are one group of proteins; as we know there are very many different kinds of proteins. The building blocks of enzymes are amino acids, small molecules that the body can make with a few exceptions. There are eight so-called essential amino acids for humans, which we cannot synthesize on our own; they must come from the food we eat. If we don’t eat the right kinds of food, we may be short of some amino acids. This is not a good situation, because we then cannot make the proper enzymes that we need for good health. ‘Good health’ here means proper functioning of all parts of the body.

Our specialized workers – enzymes – help to speed up biochemical reactions. They put so-called substrates together, and break them apart. Enzymes are frequently named after the specific substrate they work with; their names always end in –ase. For example, the enzyme that breaks down milk sugar, which is lactose, is called lactase. Amylase is an enzyme in the saliva that begins the process of breaking down carbohydrates in the mouth to smaller carbohydrates. As you know, small carbohydrates (sugars) have a sweet taste; complex carbohydrates (e.g. flour) do not. Try to chew a piece of plain bread (nothing on it!) for a while and discover what happens!  Incidentally, whenever you see the ending –ose, you will know that this is a sugar, such as glucose, fructose, galactose and sucrose.

Enzymes can only do their many jobs properly within specific environmental conditions that have a very limited range of pH, temperature, and other chemical factors. Therefore, if the internal part of a body becomes too alkaline or acid, too hot or cold, or if there are other chemical malfunctions, the enzymes will not work and may break down themselves. You can imagine what a chaotic situation may follow!

Enzymes don’t work in isolation, and they actually have helpers, so-called co-enzymes (or co-factors), that literally help enzymes bind to their specific substrates.  It’s a little like a person who helps you get into the saddle on a horse’ back. You may have wondered how vitamins work, and that is what they do: Help enzymes! 

There are also ‘inhibitors’ that interfere with enzyme functions; one group is called ‘competitive’ (the substrate may replace them), and one group is called ‘non-competitive’ (which is not replaced).  Poisons, such as cyanide, and many drugs are enzyme inhibitors.

This week, you will be working with enzyme functions. Before you begin your work, please read the Introduction very carefully. You will be doing two experiments for which your Lab Kit is required. You will need a few additional items: A stove top to boil water, hot pads (= pot holders), 4 microwave safe cups, a pot for boiling water in, 2 water bath containers, some string and a watch.  

Experiment 1: Effect of Enzyme Concentration

You will be working with yeast, which contains the enzyme catalase, and hydrogen peroxide. You will test how the amount of catalase concentration affects the reaction, which is oxygen production.

PLEASE read the introduction first so that these experiments will make sense, and then, carefully, read and follow the instructions. It would be a really good idea, if you had an assistant for this experiment, to help you with measuring the balloons. If there is a lot of enzyme activity, you must be careful holding on to your balloon. Keep taking good notes during the experiment to complete Table 1 and then answer the five questions carefully.

Experiment 2: Effect of Temperature on Enzyme Activity

Again, please follow the instructions carefully step by step, and complete Table 2. Then take your time answering the questions. It is good to be creative, but it must make sense in terms of testing enzyme functions.

Also, when you draw your graphs for each experiment, please remember that you are looking at relationships between two variables!

Take your time with each individual experiment and don’t try to do them in one sitting. The more carefully you will handle each experiment, the better the outcome will be. I recommend that you invite a family member or friend to help you at least with the balloon exercises – let them be your co-enzymes!

Have fun with these experiments!

UMUC Biology 102/103

Lab 4: Enzymes

INSTRUCTIONS:

· On your own and without assistance, complete this Lab 4 Answer Form electronically and submit it via the Assignments Folder by the date listed on your Course Schedule (under Syllabus).

· To conduct your laboratory exercises, use the Laboratory Manual that is available in the WebTycho classroom (Reserved Reading or provided by your instructor) or at the eScience Labs Student Portal. Laboratory exercises on your CD may not be updated.

· Save your Lab4AnswerForm in the following format: LastName_Lab4 (e.g., Smith_Lab4). .

· You should submit your document in a Word ( or x) or Rich Text Format (.rtf) for best compatibility.

Experiment 1: Effect of Enzyme Concentration

Table 1: Effect of Enzyme Concentration on the Production of Gas

Tube

Amount of yeast

Balloon circumference (cm) After 1 minute

Balloon circumference (cm) After 3 minutes

Balloon circumference (cm) After 5 minutes

Final Circumference (cm)

Time Required to Complete

1

0.05 g

2

0.005 g

3

0.0005 g

Questions

1. What is the enzyme in this experiment? What is the substrate?

2. Did you notice a difference in the rate of reaction in the tubes with different concentrations of enzymes? Why or why not?

3. What was the effect of using less enzyme on your experiment?

4. Do you expect more enzyme activity if the substrate concentration is increased or decreased? Draw a graph to illustrate this relationship.

5. Hydrogen peroxide is toxic to cells, yet is a common byproduct of the reactions that occur inside the body. How cant his compound be changed to become non-toxic (Hint: Look at the chemical formula of hydrogen peroxide)?

Experiment 2: Effect of Temperature on Enzyme Activity

Table 2: Effect of Temperature on the Production of Gas

Tube

Final Circumference (cm)

Time Required to Complete

Initial Temp. (°C)

Final Temp. (°C)

Circumference (cm) After 1 minute

Circumference (cm) After 3 minutes

Circumference (cm) After 5 minutes

Refrigerator

Room Temperature

Hot Water (~85 °C)

Boiling Water (~100 °C)

Questions
1. What is the enzyme in this experiment? What is the substrate?

2. How does temperature affect enzyme function?

3. Do plants and animals have an enzyme that breaks down hydrogen peroxide? How could you test this?

4. How did the boiling water affect the overall reaction?

5. How can enzyme activity be increased?

6. Design an experiment to determine the optimal temperature for enzyme function, complete with controls. Where would you find the enzymes for this experiment? What substrate would you use?

7. Draw a graph using balloon diameter vs. temperature. What is the correlation?

TYPE YOUR FULL NAME:

MULTIPLE CHOICE—Conceptual

21. The residual interest in a corporation belongs to the

a. management.

b. creditors.

c. common stockholders.

d. preferred stockholders.

22. The pre-emptive right of a common stockholder is the right to

a. share proportionately in corporate assets upon liquidation.

b. share proportionately in any new issues of stock of the same class.

c. receive cash dividends before they are distributed to preferred stockholders.

d. exclude preferred stockholders from voting rights.

23. The pre-emptive right enables a stockholder to

a. share proportionately in any new issues of stock of the same class.

b. receive cash dividends before other classes of stock without the pre-emptive right.

c. sell capital stock back to the corporation at the option of the stockholder.

d. receive the same amount of dividends on a percentage basis as the preferred stockholders.

24. In a corporate form of business organization, legal capital is best defined as

a. the amount of capital the state of incorporation allows the company to accumulate over its existence.

b. the par value of all capital stock issued.

c. the amount of capital the federal government allows a corporation to generate.

d. the total capital raised by a corporation within the limits set by the Securities and Exchange Commission.

25. Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders

a. are entitled to a dividend every year in which the business earns a profit.

b. have the rights to specific assets of the business.

c. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

d. can negotiate individual contracts on behalf of the enterprise.

26. Total stockholders’ equity represents

a. a claim to specific assets contributed by the owners.

b. the maximum amount that can be borrowed by the enterprise.

c. a claim against a portion of the total assets of an enterprise.

d. only the amount of earnings that have been retained in the business.

27. A primary source of stockholders’ equity is

a. income retained by the corporation.

b. appropriated retained earnings.

c. contributions by stockholders.

d. both income retained by the corporation and contributions by stockholders.

28. Stockholders’ equity is generally classified into two major categories:

a. contributed capital and appropriated capital.

b. appropriated capital and retained earnings.

c. retained earnings and unappropriated capital.

d. earned capital and contributed capital.

29. The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the

a. pro forma method.

b. proportional method.

c. incremental method.

d. either the proportional method or the incremental method.

30. When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the

a. market value of the services received.

b. par value of the shares issued.

c. market value of the shares issued.

d. Any of these provides an appropriate basis for recording the transaction.

31. Direct costs incurred to sell stock such as underwriting costs should be accounted for as

1. a reduction of additional paid-in capital.

2. an expense of the period in which the stock is issued.

3. an intangible asset.

a. 1

b. 2

c. 3

d. 1 or 3

32. A “secret reserve” will be created if

a. inadequate depreciation is charged to income.

b. a capital expenditure is charged to expense.

c. liabilities are understated.

d. stockholders’ equity is overstated.

33. Which of the following represents the total number of shares that a corporation may issue under the terms of its charter?

a. authorized shares

b. issued shares

c. unissued shares

d. outstanding shares

34. Stock that has a fixed per-share amount printed on each stock certificate is called

a. stated value stock.

b. fixed value stock.

c. uniform value stock.

d. par value stock.

35. Which of the following is not a legal restriction related to profit distributions by a corporation?

a. The amount distributed to owners must be in compliance with the state laws governing corporations.

b. The amount distributed in any one year can never exceed the net income reported for that year.

c. Profit distributions must be formally approved by the board of directors.

d. Dividends must be in full agreement with the capital stock contracts as to preferences and participation.

36. In January 2010, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2010, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares

a. decreased total stockholders’ equity.

b. increased total stockholders’ equity.

c. did not change total stockholders’ equity.

d. decreased the number of issued shares.

37. Treasury shares are

a. shares held as an investment by the treasurer of the corporation.

b. shares held as an investment of the corporation.

c. issued and outstanding shares.

d. issued but not outstanding shares.

38. When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?

a. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value.

b. Paid-in capital in excess of par for the purchase price.

c. Treasury stock for the purchase price.

d. Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value.

39. “Gains” on sales of treasury stock (using the cost method) should be credited to

a. paid-in capital from treasury stock.

b. capital stock.

c. retained earnings.

d. other income.

40. Porter Corp. purchased its own par value stock on January 1, 2010 for $20,000 and debited the treasury stock account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from

a. additional paid-in capital to the extent that previous net “gains” from sales of the same class of stock are included therein; otherwise, from retained earnings.

b. additional paid-in capital without regard as to whether or not there have been previous net “gains” from sales of the same class of stock included therein.

c. retained earnings.

d. net income.

41. How should a “gain” from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?

a. As ordinary earnings shown on the income statement.

b. As paid-in capital from treasury stock transactions.

c. As an increase in the amount shown for common stock.

d. As an extraordinary item shown on the income statement.

42. Which of the following best describes a possible result of treasury stock transactions by a corporation?

a. May increase but not decrease retained earnings.

b. May increase net income if the cost method is used.

c. May decrease but not increase retained earnings.

d. May decrease but not increase net income.

43. Which of the following features of preferred stock makes the security more like debt than an equity instrument?

a. Participating

b. Voting

c. Redeemable

d. Noncumulative

44. The cumulative feature of preferred stock

a. limits the amount of cumulative dividends to the par value of the preferred stock.

b. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.

c. means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock.

d. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends.

45. According to the FASB, redeemable preferred stock should be

a. included with common stock.

b. included as a liability.

c. excluded from the stockholders’ equity heading.

d. included as a contra item in stockholders’ equity.

46. Cumulative preferred dividends in arrears should be shown in a corporation’s balance sheet as

a. an increase in current liabilities.

b. an increase in stockholders’ equity.

c. a footnote.

d. an increase in current liabilities for the current portion and long-term liabilities for the long-term portion.

47. At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the

a. declaration of a stock split.

b. declaration of a stock dividend.

c. purchase of treasury stock.

d. payment in full of subscribed stock.

48. An entry is not made on the

a. date of declaration.

b. date of record.

c. date of payment.

d. An entry is made on all of these dates.

49. Cash dividends are paid on the basis of the number of shares

a. authorized.

b. issued.

c. outstanding.

d. outstanding less the number of treasury shares.

50. Which of the following statements about property dividends is not true?

a. A property dividend is usually in the form of securities of other companies.

b. A property dividend is also called a dividend in kind.

c. The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.

d. All of these statements are true.

51. Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2010, Houser distributed these shares of stock as a dividend to its stockholders. This is an example of a

a. property dividend.

b. stock dividend.

c. liquidating dividend.

d. cash dividend.

52. A dividend which is a return to stockholders of a portion of their original investments is a

a. liquidating dividend.

b. property dividend.

c. liability dividend.

d. participating dividend.

53. A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

a. Retained Earnings.

b. a paid-in capital account.

c. Accumulated Depletion.

d. Accumulated Depreciation.

54. If management wishes to “capitalize” part of the earnings, it may issue a

a. cash dividend.

b. stock dividend.

c. property dividend.

d. liquidating dividend.

55. Which dividends do not reduce stockholders’ equity?

a. Cash dividends

b. Stock dividends

c. Property dividends

d. Liquidating dividends

56. The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding

a. increases common stock outstanding and increases total stockholders’ equity.

b. decreases retained earnings but does not change total stockholders’ equity.

c. may increase or decrease paid-in capital in excess of par but does not change total stockholders’ equity.

d. increases retained earnings and increases total stockholders’ equity.

57. Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?

a. There should be no capitalization of retained earnings.

b. Par value

c. Market value on the declaration date

d. Market value on the payment date

58. The issuer of a 5% common stock dividend to common stockholders preferably should transfer from retained earnings to contributed capital an amount equal to the

a. market value of the shares issued.

b. book value of the shares issued.

c. minimum legal requirements.

d. par or stated value of the shares issued.

59. At the date of declaration of a small common stock dividend, the entry should not include

a. a credit to Common Stock Dividend Payable.

b. a credit to Paid-in Capital in Excess of Par.

c. a debit to Retained Earnings.

d. All of these are acceptable.

60. The balance in Common Stock Dividend Distributable should be reported as a(n)

a. deduction from common stock issued.

b. addition to capital stock.

c. current liability.

d. contra current asset.

61. A feature common to both stock splits and stock dividends is

a. a transfer to earned capital of a corporation.

b. that there is no effect on total stockholders’ equity.

c. an increase in total liabilities of a corporation.

d. a reduction in the contributed capital of a corporation.

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

a. No effect No effect

b. Increase No effect

c. Decrease No effect

d. Decrease Decrease

63. Which one of the following disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements?

a. Dividend preferences

b. Liquidation preferences

c. Call prices

d. Conversion or exercise prices

64. The rate of return on common stock equity is calculated by dividing

a. net income less preferred dividends by average common stockholders’ equity.

b. net income by average common stockholders’ equity.

c. net income less preferred dividends by ending common stockholders’ equity.

d. net income by ending common stockholders’ equity.

65. The payout ratio can be calculated by dividing

a. dividends per share by earnings per share.

b. cash dividends by net income less preferred dividends.

c. cash dividends by market price per share.

d. dividends per share by earnings per share and dividing cash dividends by net income less preferred dividends.

66. Younger Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The liquidation value of the preferred is equal to its par value. The book value per share of the common stock is unaffected by

a. the declaration of a stock dividend on preferred payable in preferred stock when the market price of the preferred is equal to its par value.

b. the declaration of a stock dividend on common stock payable in common stock when the market price of the common is equal to its par value.

c. the payment of a previously declared cash dividend on the common stock.

d. a 2-for-1 split of the common stock.

67. Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders’ equity divided by the number of common stock shares outstanding is called

a. book value per share.

b. par value per share.

c. stated value per share.

d. market value per share.

68. Dividends are not paid on

a. noncumulative preferred stock.

b. nonparticipating preferred stock.

c. treasury common stock.

d. Dividends are paid on all of these.

69. Noncumulative preferred dividends in arrears

a. are not paid or disclosed.

b. must be paid before any other cash dividends can be distributed.

c. are disclosed as a liability until paid.

d. are paid to preferred stockholders if sufficient funds remain after payment of the current preferred dividend.

70. How should cumulative preferred dividends in arrears be shown in a corporation’s statement of financial position?

a. Note disclosure

b. Increase in stockholders’ equity

c. Increase in current liabilities

d. Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in long-term liabilities for the balance

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