(TCO A) Cal Co. appropriately uses the equity method to account for its investment in Cardwell Corp. As of the end of 20X3, Cardwell's common stock had suffered a significant decline in fair value, which is expected to be recovered over the next several months. How should Cal Co. account for the decline in value?

Calibri should switch to the fair-value method.

Calibri should decrease the balance in the investment account to the current value and recognize a loss on the income statement.

Calibri should not record its share of Cardwell's 20X3 earnings until the decline in the fair value of the stock has been recovered.

Calibri should decrease the balance in the investment account to the current value and recognize an unrealized loss on the balance sheet.