Effect of various methods of accounting for marketable equity securities. Infor- mation 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 I and Year 2 and the presentation of in- formation about these securities on the balance sheet on December 31. Year I 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 I and Year 2 under each of the three treat- ments of these securities in parts

a, b, and

c. Why do the combined income amounts differ? Will total shareholders' equity differ? Why or why not?

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Acquisition Cost in Dividends Received during Market Dividends Market Value on Dec. 31, Selling Price in Received Value on during Dec. 31. Security Year 1 Year 1 Year 1 Year 2 Year 2 Year 2 G.... $18,000 $ 800 $16,000 $14,500 $ 200 H 25,000 1,500 24.000 26,000 500 12.000 1,000 14,000 1,500 $15.000 $55,000 $3,300 $54,000 $40,500 $2,200 $15.000