When a company sells available-for-sale securities, a reclassification adjustment is neces-sary to avoid counting gains and losses twice.

Question

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When a company sells available-for-sale securities, a reclassification adjustment is necessary to ensure that gains and losses that were previously recognized in other comprehensive income are not double-counted in net income upon sale. This adjustment moves the gains or losses from accumulated other comprehensive income to net income to reflect the realized gains or losses.

When a Company Sells Available-For-Sale Securities, a Reclassification Adjustment Is