Luca Merchandising Inc. (LMI) is a privately held import and export company located in Montreal considering going public in the next fiscal year. The company decided to purchase  shares in two companies, Terra Nova Inc. (TNI) and McBeal Ltd. (ML). Information related to these investments is as follows:

Terra Nova Inc.:

• Acquired 100,000 shares of the company, accounting for 22% of total shares outstanding.
• Paid $20/share in 2018.
• Shares traded at $25/share at the end of 2018 and $28/share at the end of 2019.
• LMI does not have a seat on the board of directors.
• LMI and TNI do not engage in any trade activities.
• LMI accounts for its investment in TNI using the equity method.

McBeal Ltd.:

• Acquired 50,000 shares of the company, accounting for 10% of total shares
  outstanding.
• Paid $50/share in 2017.
• Shares traded at $43/share at the end of 2018 and $40/share at the end of 2019.
• LMI accounts for its investment using FVPL.

Balance sheet amounts at December 31, 2019:

• Investment in TNI $1,900,000
• Investment in ML $2,000,000

Required:
a. Suppose LMI hired you as an advisor. Discuss the accounting method(s) you would recommend for the investment in TNI.
b. Discuss the alternative accounting methods available for the investment in ML. Which one of the methods would provide the best financial picture for LMI and why?
c. Now suppose that both TNI and ML are small-cap stocks that are not frequently traded in the market. What are the reporting issues related to these securities and how should firms account for these types of investments?