Tomlin Enterprises has a credit balance of $80,000 in its Allowance to Adjust Long-Term Investments to Market account before adjustment.Its investment portfolio has a total cost of $500,000 and a market value of $450,000.The year-end adjustment entry that would be recorded in the books of Tomlin Enterprises is:

Question

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The adjustment entry should be made for the difference between the cost and market value of the investments. Therefore, we need to debit the Allowance to Adjust Long-Term Investments to Market account and credit the Unrealized Loss on Investments account. The amount of the adjustment should be the difference between the cost and market value of the investments, which is $500,000 - $450,000 = $50,000.

The entry to adjust the Allowance to Adjust Long-Term Investments to Market account would be:

Debit Allowance to Adjust Long-Term Investments to Market: $50,000
Credit Unrealized Loss on Investments: $50,000

After this adjustment, the balance in the Allowance to Adjust Long-Term Investments to Market account would be $80,000 - $50,000 = $30,000 (a credit balance, which means that there is still a net unrealized gain on the investments).

Tomlin Enterprises Has a Credit Balance of $80,000 in Its