Effect of various methods of accounting for marketable equity securities. Information related to marketable equity securities of Callahan Corporation appears below.

a. Assume that these securities represent trading securities. Indicate the nature and amount of income recognized during Year 1 and Year 2 and the presentation of information about these securities on the balance sheet on December 31, Year 1 and Year 2.

b. Repeat part a assuming that these securities represent temporary investments of excess cash by Callahan Corporation.

c. Repeat part a assuming that these securities represent long-term investments by Callahan Corporation.

d. Compute the combined income for Year 1 and Year 2 under each of the three treatments of these securities in parts \(\mathbf{a}, \mathbf{b}\), and \(\mathbf{c}\). Why do the combined income amounts differ? Will total shareholders' equity differ? Why or why not?

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Dividends Market Dividends Market Acquisition Received Value on Selling Received Value on Cost in during Dec. 31, Price in during Dec. 31, Security Year 1 Year 1 Year 1 Year 2 Year 2 Year 2 G.. $18,000 $ 800 H 25,000 1,500 $16,000 $14,500 24,000 26,000 $ 200 500 12,000 1,000 14,000 1,500 $15,000 $55,000 $3,300 $54,000 $40,500 $2,200 $15,000