At January 1, 2011, a company had a net valuation allowance account credit balance for investments in securities available-for-sale of $20,000. At December 31, 2011, the total cost of the relevant portfolio was $300,000, and total market value was $275,000. The entry required on December 31, 2011, would reflect a

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The market value decreased by $25,000 ($300,000 - $275,000). Since there was already a $20,000 credit balance, an additional $5,000 credit is needed to adjust the valuation allowance to reflect the total unrealized loss.

At January 1, 2011, a Company Had a Net Valuation