Barchak Corporation began operations on January 1, 2010.At December 31, 2010, Barchak appropriately had a credit balance in Allowance for Change in Value of Investments of $30.No transactions related to these investments occurred during 2011, and the cost and market values on December 31, 2011, are as follows: $\begin{array}{lcc}
\text { Investment }&\text { Cost }&\text { Market Value }\
\text { A Company } & \$ 650&\$680 \
\text { B Company } & 115&110 \
\text { C Company } & 445&420 \
\text { D Company } & 80&100 \
\end{array}$ In the December 31, 2011 adjusting entry, there will be a

Question

Barchak Corporation began operations on January 1, 2010.At December 31, 2010, Barchak appropriately had a credit balance in Allowance for Change in Value of Investments of $30.No transactions related to these investments occurred during 2011, and the cost and market values on December 31, 2011, are as follows: $\begin{array}{lcc}
\text { Investment }&\text { Cost }&\text { Market Value }\
 \text { A Company } & \$ 650&\$680 \
 \text { B Company } & 115&110 \
 \text { C Company } & 445&420 \
 \text { D Company } & 80&100 \
\end{array}$  In the December 31, 2011 adjusting entry, there will be a

Quizplus · Accepted Answer

The total market value of the investments at the end of 2011 is $1,310 ($680 + $110 + $420 + $100), and the total cost is $1,290 ($650 + $115 + $445 + $80). The market value exceeds the cost by $20, indicating an overall increase in value. However, since there was already a $30 credit balance in the Allowance for Change in Value of Investments, to adjust this account to reflect the $20 increase in value, a debit of $50 is needed to reduce the allowance account to the correct balance. This adjustment ensures that the allowance account reflects the net change in the value of the investments.

Barchak Corporation Began Operations on January 1, 2010 In the December 31, 2011 Adjusting Entry, There Will Be