Hartney Consulting Services is involved in the following investments as of December 31, 1996. 1. Owns 40 percent of the common stock issued by Doyle Corporation. Doyle Corporation’s stock is actively traded, and Hartney Consulting intends to hold this investment for at least five years. Chapter 8 Investments in Equity Securities 397 2. Owns 55 percent of the common stock issued by Jacobs Automotive Parts Manufac¬ turing. This stock is actively traded. Hartney Consulting intends to hold this investment indefinitely. 3. Owns 10 percent of the common stock issued by Markert Computers. Markert Computers is a closely held company with just two other stockholders. 4. Owns 45 percent of the common stock issued by Luther Brewery. Luther Brewery has just recently joined the New York Stock Exchange. Hartney intends to sell this investment to raise cash within the next five years. 5. Owns 15 percent of the common stock of Hartney Farms. The stock is publicly traded, but Hartney intends to hold the investment indefinitely. 6. On November 30, 1997, Hartney Consulting owned 18 percent of Whittenbach Industries. During December Hartney Consulting purchased an additional 15 percent of the company. This company’s stock is actively traded, and Hartney fully intends to hold this stock for four years. REQUIRED:

a. Indicate whether each investment should be classified as short-term or long-term on the December 31, 1997, balance sheet. Also indicate the appropriate accounting treatment for each investment. Explain your answer.

b. Explain why the nonmarketable equity securities are disclosed in the long-term investment section of the balance sheet and are not carried at market value.