Charlie Company purchased available-for-sale equity investments in 2010 at a cost of $200, 000.Their market values totaled $250, 000 and $230, 000 on December 31, 2010, and December 31, 2011, respectively.The entry required on December 31, 2011, would include a

Question

Quizplus · Accepted Answer

CThe correct entries reflect the changes in the market value of the investments. On December 31, 2011, the market value decreased from $250,000 to $230,000, a $20,000 decrease, which requires a credit to Allowance for Change in Value of Investment to adjust the value on the balance sheet. Additionally, the total change from the original cost ($200,000) to the market value at the end of 2011 ($230,000) is a $30,000 increase, which is recognized in equity through a credit to Unrealized Increase/Decrease in Value of Securities, reflecting the overall unrealized gain since purchase.

Charlie Company Purchased Available-For-Sale Equity Investments in 2010 at a Cost