Baggles Company owns stock in Hampshire Industries, which it intends to hold indefinitely because of some negative tax consequences if sold. Which of the following statements is true regarding Jonathan's reporting of the stock?
A) The stock would be classified as trading securities.
B) The stock would be classified as available-for-sale securities.
C) The stock requires no market adjustments since there are no plans to sell it.
D) Any losses on the stock are recorded in the income statement.

Question

Quizplus · Accepted Answer

The stock would be classified as available-for-sale securities because it is not intended for trading and is held indefinitely, which requires it to be reported at fair value with unrealized gains and losses recorded in other comprehensive income.

Baggles Company Owns Stock in Hampshire Industries, Which It Intends