B. Decrease | No Effect C. Increase | Decrease D. No Effect | Decrease
24) 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 circum-stances 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.
25) Use of the effective-interest method in amortizing bond premiums and discounts results in
A. a variable rate of return on the book value of the investment.
B. a smaller amount of interest income over the life of the bond issue than would result from use of the straight-line method.
C. a varying amount being recorded as interest income from period to period.
D. a greater amount of interest income over the life of the bond issue than would result from use of the straight-line method.
26) Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as other