At January 1,2014,a company had a net valuation allowance account credit balance for investments in securities available-for-sale of $20,000.At December 31,2014,the total cost of the relevant portfolio was $300,000,and total market value was $275,000.The entry required on December 31,2014,would reflect a

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The correct entry would be a credit of $5,000 to the valuation allowance account to adjust it from a $20,000 credit balance to reflect the new difference between the cost and market value of the portfolio ($300,000 - $275,000 = $25,000). This adjustment is necessary to align the valuation allowance with the current unrealized loss.

At January 1,2014,a Company Had a Net Valuation Allowance Account