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 Baggles reporting of the stock?

1) The stock requires no market adjustments since there are no plans to sell it.

2) Any losses on the stock are recorded in the income statement.

3) The stock would be classified as trading securities.

4) The stock would be classified as a long-term investment.

Please give correct answer above.