Under the equity method of accounting for investments

26. Under the equity method of accounting for investments, an investor recognizes its share
of the earnings in the period in which the
a. investor sells the investment.
b. investee declares a dividend.
c. investee pays a dividend.
d. earnings are reported by the investee in its financial statements.
17 - 4
27. Dane, Inc., owns 35% of Marin Corporation. During the calendar year 2004, Marin had net
earnings of $300,000 and paid dividends of $30,000. Dane mistakenly recorded these
transactions using the fair value method rather than the equity method of accounting.
What effect would this have on the investment account, net income, and retained
earnings, respectively?
*28. All of the following statements regarding accounting for derivatives are correct except that *29. All of the following are characteristics of a derivative financial instrument except the
instrument

Investments
c. requires or permits net settlement.
d. All of these are characteristics.
*30. Companies that attempt to exploit inefficiencies in various derivative markets by
attempting to lock in profits by simultaneously entering into transactions in two or more
markets are called
a. arbitrageurs.
b. gamblers.
c. hedgers.
d. speculators.
*31. The accounting for fair value hedges records the derivative at its