Financial Accounting Quiz: Adjusting Entries Deferrals
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Adjusting Entries DeferralsQuestion 1 of 9

RetailPlus paid $15,600 on August 1, 2023, for rent covering August 2023 through January 2024. The payment was initially recorded as Prepaid Rent. The company's accounting period ends on November 30, 2023.

What adjusting entry should RetailPlus make on November 30, 2023, and what amount will appear on the balance sheet for the prepaid item?

Debit Rent Expense $2,600; Credit Prepaid Rent $2,600; Balance sheet shows $13,000
Debit Rent Expense $7,800; Credit Prepaid Rent $7,800; Balance sheet shows $7,800
Debit Rent Expense $13,000; Credit Prepaid Rent $13,000; Balance sheet shows $2,600
Debit Rent Expense $10,400; Credit Prepaid Rent $10,400; Balance sheet shows $5,200
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Financial Accounting Quiz

Financial Accounting Quiz: Adjusting Entries Deferrals

Practice Adjusting Entries Deferrals in Financial Accounting with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Adjusting Entries Deferrals, giving you a quick way to practice the rules, question types, and explanations that matter most for Financial Accounting.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

RetailPlus paid $15,600 on August 1, 2023, for rent covering August 2023 through January 2024. The payment was initially recorded as Prepaid Rent. The company's accounting period ends on November 30, 2023.

What adjusting entry should RetailPlus make on November 30, 2023, and what amount will appear on the balance sheet for the prepaid item?

  1. Debit Rent Expense $2,600; Credit Prepaid Rent $2,600; Balance sheet shows $13,000
  2. Debit Rent Expense $7,800; Credit Prepaid Rent $7,800; Balance sheet shows $7,800
  3. Debit Rent Expense $13,000; Credit Prepaid Rent $13,000; Balance sheet shows $2,600
  4. Debit Rent Expense $10,400; Credit Prepaid Rent $10,400; Balance sheet shows $5,200 (correct answer)
Explanation: When you encounter prepaid expense problems, you need to determine how much of the prepaid amount has been "used up" during the accounting period and should be expensed, versus how much remains as an asset on the balance sheet. RetailPlus paid $15,600 for six months of rent (August 2023 through January 2024). This equals $\frac{\15,600}{6 \text{ months}} = $2,600 per month. Since the accounting period ends November 30, 2023, you need to expense the rent for August, September, October, and November—four months total. The adjusting entry should be: Debit Rent Expense 10,400 ($$4 \times \2,600$$); Credit Prepaid Rent 10,400.Theremainingbalancesheetamountis10,400. The remaining balance sheet amount is \15,600 - $10,400 = $5,200 , representing December and January rent still prepaid. Answer choice A incorrectly expenses only one month (2,600)insteadoffourmonths,leavingtoomuchonthebalancesheet.AnswerchoiceBexpensesthreemonths(2,600) instead of four months, leaving too much on the balance sheet. Answer choice B expenses three months (7,800) rather than the correct four months, suggesting the period ended in October instead of November. Answer choice C makes the opposite error by expensing five months ($13,000), as if the period included December, leaving only one month prepaid. Answer choice D correctly identifies that four months should be expensed (10,400)withtwomonthsremainingasprepaidrent(10,400) with two months remaining as prepaid rent (5,200). Remember this pattern: Count the exact number of months from the start of the prepaid period through the end of your accounting period to determine how much to expense.

Question 2

TechCorp pays $24,000 on October 1, 2023, for a two-year insurance policy that begins coverage immediately. The company's fiscal year ends on December 31.

What adjusting entry should TechCorp record on December 31, 2023, and what will be the balance in Prepaid Insurance after this entry is posted?

  1. Debit Insurance Expense $3,000; Credit Prepaid Insurance $3,000; Prepaid Insurance balance: $21,000 (correct answer)
  2. Debit Insurance Expense $12,000; Credit Prepaid Insurance $12,000; Prepaid Insurance balance: $12,000
  3. Debit Insurance Expense $6,000; Credit Prepaid Insurance $6,000; Prepaid Insurance balance: $18,000
  4. Debit Insurance Expense $1,000; Credit Prepaid Insurance $1,000; Prepaid Insurance balance: $23,000
Explanation: The $24,000 policy covers 24 months (Oct 1, 2023 to Sept 30, 2025), so monthly expense is $1,000. From Oct 1 to Dec 31 is 3 months, so $3,000 should be expensed. The adjusting entry debits Insurance Expense $3,000 and credits Prepaid Insurance $3,000. The remaining Prepaid Insurance balance is $24,000 - $3,000 = $21,000. Choice B incorrectly expenses a full year. Choice C incorrectly expenses 6 months. Choice D incorrectly expenses only 1 month instead of 3.

Question 3

MedSupply purchased office supplies for $8,400 cash on September 15, 2023, recording the full amount as Supplies (asset account). During September and October, the company used supplies steadily. A physical count on October 31, 2023, revealed $2,100 of supplies remaining.

What adjusting entry should MedSupply record on October 31, 2023, and what was the average monthly consumption rate of supplies?

  1. Debit Supplies Expense $4,200; Credit Supplies $4,200; Average monthly consumption: $4,200
  2. Debit Supplies Expense $2,100; Credit Supplies $2,100; Average monthly consumption: $1,050
  3. Debit Supplies Expense $6,300; Credit Supplies $6,300; Average monthly consumption: $3,150 (correct answer)
  4. Debit Supplies Expense $6,300; Credit Supplies $6,300; Average monthly consumption: $4,200
Explanation: When you encounter questions about supplies and adjusting entries, you're dealing with the matching principle—expenses must be recorded in the period when they're consumed, not necessarily when they're purchased. Let's work through this systematically. MedSupply started with $8,400 in supplies on September 15. By October 31, only $2,100 remains. This means the company consumed $8,400 - $2,100 = $6,300 worth of supplies over the period from September 15 to October 31. The adjusting entry must transfer this consumed amount from the asset account (Supplies) to an expense account (Supplies Expense). Therefore, you debit Supplies Expense $6,300 and credit Supplies $6,300. For the monthly consumption rate, $6,300 was consumed over two months (September 15-October 31 is approximately 2 months), giving us $6,300 ÷ 2 = $3,150 per month on average. Answer A incorrectly calculates the consumed supplies as $4,200, which would leave $4,200 remaining instead of the actual $2,100 counted. Answer B uses $2,100 as the expense amount—this represents the supplies remaining, not consumed. The monthly rate of $1,050 follows from this error. Answer D correctly identifies $6,300 as consumed but incorrectly states the monthly rate as $4,200, apparently dividing by 1.5 months instead of 2. Remember: adjusting entries for supplies always move the consumed portion from assets to expenses. Always calculate consumed supplies as: Beginning balance - Ending balance = Amount consumed.

Question 4

HealthFirst collected $48,000 on June 1, 2023, for annual gym memberships that provide access from June 1, 2023, through May 31, 2024. The initial entry credited Unearned Membership Revenue. The gym operates on a calendar year basis.

How much Membership Revenue should HealthFirst report on its 2023 income statement, and what will be the Unearned Membership Revenue balance on December 31, 2023?

  1. Membership Revenue: $24,000; Unearned Membership Revenue: $24,000 credit balance
  2. Membership Revenue: $28,000; Unearned Membership Revenue: $20,000 credit balance (correct answer)
  3. Membership Revenue: $32,000; Unearned Membership Revenue: $16,000 credit balance
  4. Membership Revenue: $20,000; Unearned Membership Revenue: $28,000 credit balance
Explanation: When you encounter questions about unearned revenue, you're dealing with the revenue recognition principle—revenue must be recorded when it's earned, not when cash is received. Since HealthFirst collected payment upfront for future services, you need to calculate how much was earned during 2023 versus how much remains unearned. The membership period runs from June 1, 2023, to May 31, 2024—exactly 12 months. During 2023, HealthFirst will provide services for 7 months (June through December). Therefore, the earned revenue for 2023 is: 7 months12 months×$48,000=$28,000\frac{7 \text{ months}}{12 \text{ months}} \times \$48,000 = \$28,000 The remaining unearned revenue on December 31, 2023, represents the obligation for the final 5 months of service: 5 months12 months×$48,000=$20,000\frac{5 \text{ months}}{12 \text{ months}} \times \$48,000 = \$20,000 Answer choice A incorrectly assumes the revenue should be split evenly over two calendar years rather than following the actual service period. Answer choice C calculates as if 8 months of service were provided in 2023, likely counting June through January instead of June through December. Answer choice D reverses the calculation, showing only 5 months of earned revenue instead of 7. The correct answer is B: $28,000 in Membership Revenue and a $20,000 credit balance in Unearned Membership Revenue. Remember this strategy: Always count the actual months of service provided during the accounting period, not arbitrary splits. Draw a timeline showing the service period versus the reporting period to avoid calculation errors.

Question 5

GreenCorp received $72,000 on October 1, 2023, for maintenance services to be provided monthly from October 2023 through September 2025. Half of each month's service is typically performed in the first half of the month, and half in the second half. If GreenCorp needs to prepare interim financial statements on October 15, 2023, what adjusting entry should be made?

  1. Debit Unearned Revenue $1,500; Credit Service Revenue $1,500 (correct answer)
  2. Debit Unearned Revenue $3,000; Credit Service Revenue $3,000
  3. Debit Unearned Revenue $6,000; Credit Service Revenue $6,000
  4. Debit Unearned Revenue $750; Credit Service Revenue $750
Explanation: The $72,000 covers 24 months (Oct 2023-Sep 2025), so monthly service value is $3,000. Since services are performed evenly throughout each month, by October 15 (half the month), half of October's services have been performed: $3,000 × 0.5 = $1,500. The adjusting entry debits Unearned Revenue $1,500 and credits Service Revenue $1,500. Choice B incorrectly recognizes a full month. Choice C incorrectly recognizes a full quarter. Choice D incorrectly calculates one-quarter of a month instead of one-half.

Question 6

On November 1, 2023, DataFlow received $18,000 cash for consulting services to be performed over the next 6 months. The company recorded the initial receipt as a credit to Unearned Revenue.

If DataFlow performs the consulting services evenly over the contract period, what should be the balance in the Unearned Revenue account after the December 31, 2023 adjusting entry?

  1. $12,000 credit balance representing services still owed to the customer (correct answer)
  2. $6,000 credit balance representing services still owed to the customer
  3. $15,000 credit balance representing services still owed to the customer
  4. $9,000 debit balance representing services performed but not yet billed
Explanation: The $18,000 covers 6 months of service (Nov 1, 2023 to Apr 30, 2024), so monthly revenue is $3,000. By Dec 31, 2023, 2 months of service have been performed (Nov and Dec), earning $6,000 in revenue. The adjusting entry would debit Unearned Revenue $6,000 and credit Service Revenue $6,000. The remaining Unearned Revenue balance is $18,000 - $6,000 = $12,000 credit. Choice B incorrectly calculates only 1 month remaining. Choice C incorrectly calculates only 1 month as earned. Choice D shows an impossible debit balance for Unearned Revenue.

Question 7

SportsCorp collected $84,000 on September 1, 2023, for season tickets covering 21 home games from September through March. The games are not evenly distributed: September (2 games), October (4 games), November (3 games), December (4 games), January (4 games), February (2 games), and March (2 games). The initial entry credited Unearned Ticket Revenue.

What should be the balance in Unearned Ticket Revenue after SportsCorp's adjusting entry on November 30, 2023?

  1. $36,000 credit balance representing revenue for 9 remaining games
  2. $48,000 credit balance representing revenue for 12 remaining games (correct answer)
  3. $52,000 credit balance representing revenue for 13 remaining games
  4. $44,000 credit balance representing revenue for 11 remaining games
Explanation: When you encounter unearned revenue questions, you're dealing with the liability that exists until services are actually provided. SportsCorp has a liability to provide 21 games worth of entertainment, and this liability decreases as games are played. First, calculate the revenue per game: $84,00021 games=$4,000 per game\frac{\$84,000}{21 \text{ games}} = \$4,000 \text{ per game} By November 30, 2023, SportsCorp has played games in September (2), October (4), and November (3), totaling 9 games. This means 9×$4,000=$36,0009 \times \$4,000 = \$36,000 of revenue has been earned and should be recognized. The adjusting entry removes $36,000 from Unearned Ticket Revenue (debiting the liability account) and recognizes it as Ticket Revenue (crediting revenue). Since the original balance was $84,000, the remaining unearned revenue is $\84,000 - $36,000 = $48,000 , representing the 12 remaining games (December through March). Choice A (36,000)incorrectlyrepresentstheamountthatshouldbe∗removed∗fromunearnedrevenue,notwhatremains.ChoiceC(36,000) incorrectly represents the amount that should be *removed* from unearned revenue, not what remains. Choice C (52,000) miscounts the games played, likely including only 8 games instead of 9. Choice D ($44,000) suggests 11 remaining games, which would mean 10 games were played—possibly double-counting one month or making an arithmetic error. Remember: with unearned revenue, always track what remains unearned, not what's been earned. Calculate games played through the adjustment date, then determine the liability for remaining games.

Question 8

TravelCorp purchased a 3-year equipment service contract on April 1, 2023, paying $21,600 in advance. The contract covers April 1, 2023, through March 31, 2026. TravelCorp recorded the payment as Prepaid Service Contract.

If TravelCorp prepares financial statements on June 30, 2023, what adjusting entry is needed and what is the correct classification of the remaining prepaid balance?

  1. Debit Service Contract Expense $1,800; Credit Prepaid Service Contract $1,800; Current asset: $5,400, Non-current asset: $14,400
  2. Debit Service Contract Expense $5,400; Credit Prepaid Service Contract $5,400; Current asset: $7,200, Non-current asset: $9,000
  3. Debit Service Contract Expense $1,800; Credit Prepaid Service Contract $1,800; Current asset: $7,200, Non-current asset: $12,600 (correct answer)
  4. Debit Service Contract Expense $3,600; Credit Prepaid Service Contract $3,600; Current asset: $6,000, Non-current asset: $12,000
Explanation: The 3-year contract costs $21,600, so monthly expense is $600. From April 1 to June 30 is 3 months, so $1,800 should be expensed. Remaining balance is $19,800. For classification: current portion covers July 2023-June 2024 (12 months × $600 = 7,200),andnon−currentportioncoversJuly2024−March2026(7,200), and non-current portion covers July 2024-March 2026 (19,800 - $7,200 = $12,600). Choice A incorrectly calculates current/non-current split. Choice B uses wrong expense amount. Choice D uses wrong expense amount and wrong classifications.

Question 9

CloudTech received $36,000 on July 1, 2023, for a 12-month software license that begins immediately. The company initially recorded this as Unearned License Revenue. On September 30, 2023, CloudTech needs to prepare quarterly financial statements.

What should be the balances in the Service Revenue and Unearned License Revenue accounts after the September 30, 2023 adjusting entry is recorded?

  1. Service Revenue: $12,000; Unearned License Revenue: $24,000 credit balance
  2. Service Revenue: $18,000; Unearned License Revenue: $18,000 credit balance
  3. Service Revenue: $3,000; Unearned License Revenue: $33,000 credit balance
  4. Service Revenue: $9,000; Unearned License Revenue: $27,000 credit balance (correct answer)
Explanation: When you encounter unearned revenue problems, you're dealing with the revenue recognition principle—revenue must be recorded when it's earned, not when cash is received. Since CloudTech received payment upfront for services to be provided over time, you need to calculate how much revenue has been earned by the reporting date. CloudTech received $36,000 on July 1, 2023, for a 12-month license. From July 1 to September 30 is exactly 3 months. The monthly revenue recognition is $\frac{\36,000}{12 \text{ months}} = $3,000 per month. Over 3 months, CloudTech has earned 3 \times $3,000 = $9,000 in Service Revenue. The remaining unearned portion is $36,000 - $9,000 = $27,000 , which stays in Unearned License Revenue as a credit balance representing the obligation to provide 9 more months of service. Answer A incorrectly calculates 4 months of revenue (12,000),perhapsbyincludingOctoberormiscountingtheperiod.AnswerBshows6monthsofrevenue(12,000), perhaps by including October or miscounting the period. Answer B shows 6 months of revenue (18,000), which would be correct if we were at December 31, not September 30. Answer C shows only 1 month of revenue ($3,000), likely from confusing the monthly amount with the total earned amount. Study tip: Always count the months carefully from the start date to the reporting date, and remember that unearned revenue decreases as you recognize revenue—the two amounts should always add up to the original cash received.