Which regular cash dividends received by the investor

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Problem 1. When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies?

a. The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee.
b. The investor should always use the fair value method to account for its investment.
c. The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee.
d. The investor should always use the equity method to account for its investment.

Problem 2. An investor has a long-term debt investment in stocks. Under the equity method, regular cash dividends received by the investor are recorded as:

a. Income
b. A reduction of the investment
c. An increasement of the investment
d. A reduction of income

Reference no: EM132822321

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