Effect of various methods of accounting for marketable equity securities. Information related to marketable equity securities of Callahan Corporation appears below. s Security Dividends Market Dividends Market Acquisition Received Value on Selling Received Value on Cost in during Dec. 31, Price in during Dec. 31, Year 1 Year 1 Year 1 Year 2 Year 2 Year 2 G

H I .

$18,000 25,000 12,000

$55,000

$ 800 1,500 1,000

$3,300

$16,000 $14,500 24,000 26,000 14,000 — $54,000 $40,500

$ 200 500 1,500

$2,200

$17,000

$17,000

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 are securities available for sale held as temporary investments of excess cash by Callahan Corporation.

c. Repeat part a assuming that these securities represent long-term investments by Callahan Corporation held as securities available for sale.

d. Compute the combined income for Year 1 and Year 2 under each of the three treatments o\

these securities in parts

a. b. and

c. Why do the combined income amounts differ1 Will total shareholders* equity differ? Why or why not?