If Ziggy Company Concluded That an Investment Originally Classified as Held

question 137

Multiple Choice

If Ziggy Company concluded that an investment originally classified as held to maturity would now more appropriately be classified as available for sale, Ziggy would:

• A) Not reclassify the investment, as original classifications are irrevocable.
• B) Reclassify the investment as available for sale and immediately recognize in net income any unrealized holding gain or loss on the reclassification date.
• C) Reclassify the investment as available for sale and immediately recognize in accumulated other comprehensive income any unrealized holding gain or loss on the reclassification date.
• D) Need to restate earnings, as the original classification was in error.

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Definitions:

Compounded Annually

This refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods, calculated once a year.

College Education

A form of higher education aiming to grant degrees in various fields of study, obtained after completing a program at a college or university.

Interest on Interest

The concept of earning interest on previously earned interest, contributing to compound growth.

Compounded Annually

Interest calculation method where the interest is added to the principal at the end of each year, and the total becomes the principal for the next year.