Mucura Enterprises has a credit balance of $40,000 in its Allowance to Adjust Long-Term Investments to Market account before adjustment.Its investment portfolio has a total cost of $250,000 and a market value of $225,000.The year-end adjustment entry that would be recorded in the books of Mucura Enterprises is:

Question

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The adjustment to the Allowance to Adjust Long-Term Investments to Market account should be equal to the difference between the total cost and market value of the investment portfolio, which is $25,000 ($250,000 - $225,000). Since the credit balance in the allowance account is already $40,000, the adjustment should be a debit of $15,000 ($40,000 - $25,000) to the allowance account and a credit of $15,000 to the Unrealized Loss on Long-Term Investments account. Therefore, option B is the correct entry.

Mucura Enterprises Has a Credit Balance of $40,000 in Its