Final answer:
The correct journal entry to adjust long-term investments with significant influence when retained earnings has decreased is Debit Long Term Investments, Credit Retained Earnings. retained earnings decreased by $2,000, the journal entry would be: Debit Long Term Investments $2,000, Credit Retained Earnings $2,000
Step-by-step explanation:
The correct journal entry to adjust long-term investments with significant influence when retained earnings has decreased is: Debit Long Term Investments, Credit Retained Earnings. When retained earnings decreases, it means that the company has experienced a loss. By debiting the Long Term Investments account, we are reducing its value on the balance sheet to reflect the decrease in value. We then credit the Retained Earnings account to also reflect the decrease in earnings.
For example, if a company's long-term investments with significant influence had a balance of $10,000 and the retained earnings decreased by $2,000, the journal entry would be: Debit Long Term Investments $2,000, Credit Retained Earnings $2,000.