Financial Accounting Quiz: Recording Journal Entries
20 questions · exam conditions
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Recording Journal EntriesQuestion 1 of 20

A company pays its weekly payroll of $25,000 every Friday for a five-day work week ending on that day. If the fiscal year-end, December 31, falls on a Tuesday, what is the required adjusting journal entry for accrued wages?

Debit Salaries and Wages Expense $15,000; Credit Salaries and Wages Payable $15,000.
Debit Salaries and Wages Expense $10,000; Credit Salaries and Wages Payable $10,000.
Debit Salaries and Wages Expense $25,000; Credit Salaries and Wages Payable $25,000.
No entry is needed until the next payday in January.
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Financial Accounting Quiz

Financial Accounting Quiz: Recording Journal Entries

Practice Recording Journal Entries 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 Recording Journal Entries, 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

A company pays its weekly payroll of $25,000 every Friday for a five-day work week ending on that day. If the fiscal year-end, December 31, falls on a Tuesday, what is the required adjusting journal entry for accrued wages?

  1. Debit Salaries and Wages Expense $15,000; Credit Salaries and Wages Payable $15,000.
  2. Debit Salaries and Wages Expense $10,000; Credit Salaries and Wages Payable $10,000. (correct answer)
  3. Debit Salaries and Wages Expense $25,000; Credit Salaries and Wages Payable $25,000.
  4. No entry is needed until the next payday in January.
Explanation: The adjusting entry must record the wages earned by employees but not yet paid as of year-end. The daily wage expense is $25,000 / 5 days = $5,000. By the end of Tuesday, employees have worked for two days (Monday and Tuesday) of the week. Therefore, the accrued wage expense is $5,000/day × 2 days = $10,000. The entry is a debit to Salaries and Wages Expense and a credit to the liability account, Salaries and Wages Payable.

Question 2

A company uses a perpetual inventory system. It initially purchased $5,000 of inventory on account from a supplier. Two days later, it returned goods with an invoice price of $800 because they were not the correct model. What is the journal entry to record the return of the merchandise?

  1. Debit Accounts Payable $800; Credit Purchase Returns and Allowances $800.
  2. Debit Inventory $800; Credit Accounts Payable $800.
  3. Debit Accounts Payable $800; Credit Inventory $800. (correct answer)
  4. Debit Sales Returns and Allowances $800; Credit Accounts Payable $800.
Explanation: In a perpetual inventory system, the Inventory account is continuously updated. When goods are returned to a supplier, the liability to the supplier (Accounts Payable) is reduced, and the Inventory account is also reduced by the cost of the returned goods. Therefore, the correct entry is a debit to Accounts Payable and a credit to Inventory for $800. The Purchase Returns and Allowances account is used in a periodic system.

Question 3

On October 1, a company sold merchandise and accepted a 6-month, non-interest-bearing note with a face value of $30,000. The present value of the note, based on an appropriate market interest rate, was determined to be $29,126 on the date of sale. Which journal entry correctly records this transaction on October 1?

  1. Debit Notes Receivable $30,000; Credit Sales Revenue $30,000.
  2. Debit Notes Receivable $29,126; Credit Sales Revenue $29,126.
  3. Debit Notes Receivable $30,000; Credit Discount on Notes Receivable $874; Credit Sales Revenue $29,126. (correct answer)
  4. Debit Notes Receivable $30,000; Credit Interest Revenue $874; Credit Sales Revenue $29,126.
Explanation: Revenue should be recognized at the fair value of the consideration received, which is the present value of the note, 29,126.Thenoteitselfmustberecordedatitsfacevalue(29,126. The note itself must be recorded at its face value (30,000). The difference between the face value and the present value represents the imputed interest and is recorded in a contra-asset account, Discount on Notes Receivable ($30,000 - $29,126 = $874). This discount will be amortized to interest revenue over the life of the note.

Question 4

On March 10, a company sells merchandise on account for $20,000 with terms 2/10, n/30. The transaction is subject to a 5% sales tax. The company uses the gross method to account for sales discounts. Which of the following journal entries correctly records this sale?

  1. Debit Accounts Receivable $20,580; Debit Sales Discounts $420; Credit Sales Revenue $20,000; Credit Sales Tax Payable $1,000.
  2. Debit Accounts Receivable $21,000; Credit Sales Revenue $20,000; Credit Sales Tax Payable $1,000. (correct answer)
  3. Debit Accounts Receivable $20,580; Credit Sales Revenue $19,600; Credit Sales Tax Payable $980.
  4. Debit Accounts Receivable $21,000; Credit Sales Revenue $21,000.
Explanation: Under the gross method, the sale is recorded at its full amount without considering the potential sales discount. The sales tax is calculated on the sales price. Therefore, Accounts Receivable is debited for the total invoice amount (20,000sale+(20,000 sale + (20,000 * 5%) tax) = $21,000. Sales Revenue is credited for the price of the goods, $20,000, and Sales Tax Payable is credited for the tax amount, $1,000. The sales discount is only recorded if the customer pays within the discount period.

Question 5

A company had credit sales of $1,200,000 for the year. The company uses the allowance method and estimates its bad debt expense at 2% of credit sales. The Allowance for Doubtful Accounts had a beginning credit balance of $5,000 and write-offs during the year totaled $12,000. What is the journal entry to record bad debt expense for the year?

  1. Debit Bad Debt Expense $17,000; Credit Allowance for Doubtful Accounts $17,000.
  2. Debit Bad Debt Expense $24,000; Credit Allowance for Doubtful Accounts $24,000. (correct answer)
  3. Debit Bad Debt Expense $31,000; Credit Allowance for Doubtful Accounts $31,000.
  4. Debit Bad Debt Expense $24,000; Credit Accounts Receivable $24,000.
Explanation: When using the percentage-of-sales method, bad debt expense is calculated by applying the estimated percentage directly to the credit sales for the period. The existing balance in the Allowance for Doubtful Accounts is ignored when calculating the expense. The expense is $1,200,000 × 2% = $24,000. The journal entry is a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.

Question 6

A company owns equipment that originally cost $90,000. As of January 1, its accumulated depreciation was $60,000. The equipment is being depreciated using the straight-line method over 9 years with no salvage value. On September 30, the company sold the equipment for $25,000 cash. Which of the following is part of the correct compound journal entry to record the sale?

  1. A credit to Gain on Sale of Equipment for $2,500. (correct answer)
  2. A debit to Loss on Sale of Equipment for $5,000.
  3. A debit to Accumulated Depreciation for $60,000.
  4. A credit to Gain on Sale of Equipment for $5,000.
Explanation: First, update depreciation to the date of sale. Annual depreciation is $90,000 / 9 years = $10,000. Depreciation for 9 months (Jan 1 to Sep 30) is $10,000 × (9/12) = $7,500. Total accumulated depreciation at sale is $60,000 + $7,500 = $67,500. The book value is $90,000 (cost) - $67,500 (accumulated depreciation) = $22,500. The gain is the cash received minus the book value: $25,000 - $22,500 = $2,500. The complete entry would be: Debit Cash $25,000; Debit Accumulated Depreciation $67,500; Credit Equipment $90,000; Credit Gain on Sale $2,500.

Question 7

On January 1, Year 1, a company issued $1,000,000 of 10-year, 7% bonds when the market interest rate was 6%. As a result, the bonds were issued for total proceeds of $1,073,601. Which journal entry correctly records the issuance of these bonds?

  1. Debit Cash $1,073,601; Credit Bonds Payable $1,000,000; Credit Interest Revenue $73,601.
  2. Debit Cash $1,073,601; Credit Bonds Payable $1,073,601.
  3. Debit Cash $1,000,000; Debit Discount on Bonds Payable $73,601; Credit Bonds Payable $1,073,601.
  4. Debit Cash $1,073,601; Credit Bonds Payable $1,000,000; Credit Premium on Bonds Payable $73,601. (correct answer)
Explanation: When the stated interest rate (7%) is higher than the market interest rate (6%), bonds are issued at a premium. The cash proceeds (1,073,601)aredebited.BondsPayableisalwayscreditedforthefaceorparvalueofthebonds(1,073,601) are debited. Bonds Payable is always credited for the face or par value of the bonds (1,000,000). The excess of the proceeds over the face value is credited to a separate account, Premium on Bonds Payable ($1,073,601 - $1,000,000 = $73,601).

Question 8

A retail company using the perpetual inventory system purchased merchandise for $15,000 on account. The terms of shipping were FOB shipping point. The seller prepaid $500 in freight costs on behalf of the buyer and added the amount to the invoice. What is the journal entry the buyer should record for this transaction?

  1. Debit Inventory $15,000; Debit Freight Expense $500; Credit Accounts Payable $15,500.
  2. Debit Inventory $15,500; Credit Accounts Payable $15,500. (correct answer)
  3. Debit Purchases $15,000; Debit Freight-In $500; Credit Accounts Payable $15,500.
  4. Debit Inventory $15,000; Credit Accounts Payable $15,000.
Explanation: In a perpetual inventory system, freight costs incurred by the buyer (FOB shipping point) are considered a cost of acquiring the inventory and are added to the Inventory account. The cost of the inventory is the purchase price plus the freight, so Inventory should be debited for $15,000 + $500 = $15,500. Since the seller added the freight to the invoice, the entire amount is owed to the seller, so Accounts Payable is credited for $15,500.

Question 9

A corporation has 1,000,000 shares of $2 par value common stock outstanding. The stock has a current market value of $25 per share. The company's board of directors declares a 5% stock dividend. What is the journal entry to record the declaration of the stock dividend?

  1. Debit Retained Earnings $1,250,000; Credit Common Stock Dividend Distributable $100,000; Credit Additional Paid-in Capital $1,150,000. (correct answer)
  2. Debit Retained Earnings $100,000; Credit Common Stock Dividend Distributable $100,000.
  3. Debit Additional Paid-in Capital $1,250,000; Credit Common Stock Dividend Distributable $1,250,000.
  4. Debit Retained Earnings $1,250,000; Credit Common Stock $100,000; Credit Additional Paid-in Capital $1,150,000.
Explanation: A stock dividend of less than 20-25% is considered a small stock dividend and is recorded at the fair market value of the shares issued. Number of new shares = 1,000,000 shares × 5% = 50,000 shares. The market value is 50,000 shares × $25/share = $1,250,000. Retained Earnings is debited for this amount. Common Stock Dividend Distributable is credited for the par value (50,000 shares × $2/share = 100,000),andtheexcessiscreditedtoAdditionalPaid−inCapital(100,000), and the excess is credited to Additional Paid-in Capital (1,250,000 - $100,000 = $1,150,000).

Question 10

A corporation issues $2,000,000 of 8% bonds for total proceeds of $2,050,000. Each $1,000 bond includes 20 detachable stock warrants. Immediately after issuance, the bonds were trading ex-warrants at 99, and each warrant had a fair market value of $2. What amount should be credited to Additional Paid-in Capital—Stock Warrants upon issuance?

  1. $50,000
  2. $40,396 (correct answer)
  3. $40,000
  4. $0
Explanation: The proceeds must be allocated between the bonds and the warrants based on their relative fair market values. Fair value of bonds = $2,000,000 * 0.99 = $1,980,000. Number of warrants = (2,000,000 / 1,000) * 20 = 40,000 warrants. Fair value of warrants = 40,000 * $2 = $80,000. Total fair value = $1,980,000 + $80,000 = 2,060,000.Theportionoftheproceedsallocatedtowarrantsis(2,060,000. The portion of the proceeds allocated to warrants is (80,000 / $2,060,000) * $2,050,000 = $40,396 (rounded). This amount is credited to Additional Paid-in Capital—Stock Warrants.

Question 11

A company issued 10,000 shares of its $5 par value common stock in exchange for a parcel of land. The company's stock was actively trading at $18 per share on the date of the transaction. The land was recently appraised for $190,000 by an independent appraiser. What is the journal entry to record the acquisition of the land?

  1. Debit Land $190,000; Credit Common Stock $50,000; Credit Gain on Issuance of Stock $140,000.
  2. Debit Land $180,000; Credit Common Stock $180,000.
  3. Debit Land $190,000; Credit Common Stock $50,000; Credit Additional Paid-in Capital $140,000.
  4. Debit Land $180,000; Credit Common Stock $50,000; Credit Additional Paid-in Capital $130,000. (correct answer)
Explanation: When issuing stock for non-cash assets, the transaction is recorded at the fair value of the stock issued or the fair value of the asset received, whichever is more clearly determinable. The market price of the actively traded stock is the more reliable measure. The value of the transaction is 10,000 shares * $18/share = $180,000. The journal entry debits Land for $180,000. Common Stock is credited for the par value (10,000 shares * $5/share = 50,000),andtheexcessiscreditedtoAdditionalPaid−inCapital(50,000), and the excess is credited to Additional Paid-in Capital (180,000 - $50,000 = $130,000).

Question 12

Falcon Manufacturing purchased raw materials for $8,500 on account on March 10. On March 15, they returned $500 of defective materials and received a credit from the supplier. On March 20, they paid the remaining balance and received a 2% discount for early payment. What is the journal entry on March 20?

  1. Debit Accounts Payable $8,000; Credit Cash $7,840, Credit Purchase Discounts $160 (correct answer)
  2. Debit Accounts Payable $8,500; Credit Cash $8,330, Credit Purchase Discounts $170
  3. Debit Accounts Payable $8,000; Credit Cash $8,000
  4. Debit Accounts Payable $7,840; Credit Cash $7,840
Explanation: The correct answer is A. The balance owed after the return is 8,000(8,000 (8,500 - $500). The 2% discount applies to this balance: $8,000 × 2% = $160 discount. Cash paid = $8,000 - $160 = $7,840. Choice B incorrectly applies the discount to the original amount before the return. Choice C ignores the discount entirely. Choice D treats the discounted amount as the accounts payable balance, which understates the liability reduction.

Question 13

A corporation repurchased 5,000 shares of its own $10 par value common stock for $22 per share. The company uses the cost method to account for treasury stock. Immediately prior to the repurchase, the company's equity section included Common Stock of $500,000 and Additional Paid-in Capital of $800,000. Which journal entry correctly records the repurchase?

  1. Debit Treasury Stock $110,000; Credit Cash $110,000. (correct answer)
  2. Debit Common Stock $50,000; Debit Additional Paid-in Capital $60,000; Credit Cash $110,000.
  3. Debit Treasury Stock $50,000; Debit Retained Earnings $60,000; Credit Cash $110,000.
  4. Debit Retained Earnings $110,000; Credit Cash $110,000.
Explanation: Under the cost method, treasury stock is recorded at the price paid to reacquire the shares. The total cost is 5,000 shares * $22/share = $110,000. The journal entry is a debit to Treasury Stock (a contra-equity account) and a credit to Cash for this amount. Par value and the original issue price are ignored at the time of repurchase under the cost method.

Question 14

On October 1, a company's board of directors declared a cash dividend of $1.25 per share on its 100,000 shares of common stock outstanding. The date of record was set for October 15, and the payment date was set for November 1. Which journal entry, if any, is required on October 15?

  1. Debit Retained Earnings $125,000; Credit Cash $125,000.
  2. Debit Dividends Payable $125,000; Credit Cash $125,000.
  3. Debit Retained Earnings $125,000; Credit Dividends Payable $125,000.
  4. No journal entry is required. (correct answer)
Explanation: There are three important dates for dividends: the declaration date, the date of record, and the payment date. A journal entry is required on the declaration date (October 1) to recognize the liability (debit Retained Earnings, credit Dividends Payable) and on the payment date (November 1) to record the cash payment (debit Dividends Payable, credit Cash). The date of record (October 15) is merely the date used to determine which shareholders are entitled to receive the dividend. It does not have a financial impact on the company, so no journal entry is recorded.

Question 15

On September 1, Year 1, a company borrowed $80,000 by signing a 9-month, 9% interest-bearing note. The entire principal and interest are due at maturity. The company's fiscal year ends on December 31. What is the adjusting journal entry required on December 31, Year 1?

  1. Debit Interest Expense $2,400; Credit Interest Payable $2,400. (correct answer)
  2. Debit Interest Expense $7,200; Credit Interest Payable $7,200.
  3. Debit Interest Expense $5,400; Credit Notes Payable $5,400.
  4. Debit Interest Expense $2,400; Credit Cash $2,400.
Explanation: The adjusting entry must recognize the interest expense incurred but not yet paid as of the end of the fiscal year. The interest is for the period from September 1 to December 31, which is 4 months. The accrued interest is calculated as: Principal × Annual Rate × Time = $80,000 × 9% × (4/12) = $2,400. The entry is a debit to Interest Expense and a credit to the liability account, Interest Payable.

Question 16

On July 1, a consulting firm received a $30,000 cash advance from a client for services to be provided evenly over the next 12 months. What is the journal entry for the consulting firm to record the receipt of this cash advance on July 1?

  1. Debit Cash $30,000; Credit Consulting Revenue $30,000.
  2. Debit Cash $30,000; Credit Consulting Revenue $15,000; Credit Unearned Revenue $15,000.
  3. Debit Cash $30,000; Credit Unearned Revenue $30,000. (correct answer)
  4. Debit Accounts Receivable $30,000; Credit Consulting Revenue $30,000.
Explanation: When cash is received before the revenue is earned, the company has an obligation to provide services in the future. This obligation is recorded as a liability called Unearned Revenue (or Deferred Revenue). Therefore, the entry on July 1 is a debit to Cash for the amount received and a credit to Unearned Revenue for the same amount. Revenue will be recognized as it is earned over the 12-month service period.

Question 17

A company that uses the allowance method for uncollectible accounts determined that a $2,500 receivable from a customer, Beta Co., is uncollectible. Before the write-off, the balance in Accounts Receivable was $200,000 and the Allowance for Doubtful Accounts had a credit balance of $15,000. Which journal entry correctly records the write-off of the Beta Co. account?

  1. Debit Bad Debt Expense $2,500; Credit Accounts Receivable $2,500.
  2. Debit Allowance for Doubtful Accounts $2,500; Credit Accounts Receivable $2,500. (correct answer)
  3. Debit Sales Returns and Allowances $2,500; Credit Accounts Receivable $2,500.
  4. Debit Bad Debt Expense $2,500; Credit Allowance for Doubtful Accounts $2,500.
Explanation: When a specific account is deemed uncollectible under the allowance method, the write-off is recorded by debiting the Allowance for Doubtful Accounts and crediting the specific customer's Accounts Receivable. This entry reduces both accounts, but it does not affect the net realizable value of accounts receivable ($200,000 - $15,000 = 185,000before;(185,000 before; (200,000 - 2,500)−(2,500) - (15,000 - $2,500) = $185,000 after). Bad Debt Expense is not debited at the time of write-off; the expense was already recognized when the allowance was established.

Question 18

On January 1, Year 1, a company issued $400,000 face value, 6% bonds for $381,647, yielding a market interest rate of 7%. Interest is paid annually on December 31. The company uses the effective-interest method of amortization. What is the journal entry to record the interest payment on December 31, Year 1?

  1. Debit Interest Expense $28,000; Credit Discount on Bonds Payable $4,000; Credit Cash $24,000.
  2. Debit Interest Expense $26,715; Credit Discount on Bonds Payable $2,715; Credit Cash $24,000. (correct answer)
  3. Debit Interest Expense $24,000; Debit Discount on Bonds Payable $2,715; Credit Cash $26,715.
  4. Debit Interest Expense $25,835; Credit Discount on Bonds Payable $1,835; Credit Cash $24,000.
Explanation: Under the effective-interest method, interest expense is the carrying value of the bonds multiplied by the market interest rate. The cash payment is the face value multiplied by the stated rate. The difference is the amortization of the discount. Cash paid = $400,000 × 6% = $24,000. Interest expense = $381,647 (carrying value) × 7% = $26,715. Discount amortization = $26,715 - $24,000 = $2,715. The entry debits Interest Expense for $26,715, credits Cash for $24,000, and credits Discount on Bonds Payable for $2,715.

Question 19

On May 1, Year 1, a company paid $4,800 for a 12-month general liability insurance policy. The company's fiscal year ends on December 31. What is the required adjusting journal entry on December 31, Year 1?

  1. Debit Insurance Expense $4,800; Credit Prepaid Insurance $4,800.
  2. Debit Insurance Expense $1,600; Credit Prepaid Insurance $1,600.
  3. Debit Insurance Expense $3,200; Credit Prepaid Insurance $3,200. (correct answer)
  4. Debit Prepaid Insurance $3,200; Credit Insurance Expense $3,200.
Explanation: The initial payment creates an asset, Prepaid Insurance. The adjusting entry must recognize the portion of the insurance that has expired. The monthly cost is $4,800 / 12 months = $400. From May 1 to December 31, 8 months have passed. The amount of insurance expense to be recognized is $400/month × 8 months = $3,200. The entry is a debit to Insurance Expense and a credit to the asset account, Prepaid Insurance, to reduce its balance.

Question 20

On January 1, Year 1, a company acquired machinery for $200,000. The machinery has a 5-year useful life and a $20,000 salvage value. The company uses the double-declining-balance method of depreciation. What is the journal entry to record depreciation for the fiscal year ended December 31, Year 2?

  1. Debit Depreciation Expense $80,000; Credit Accumulated Depreciation $80,000.
  2. Debit Depreciation Expense $72,000; Credit Accumulated Depreciation $72,000.
  3. Debit Depreciation Expense $48,000; Credit Accumulated Depreciation $48,000. (correct answer)
  4. Debit Depreciation Expense $32,000; Credit Accumulated Depreciation $32,000.
Explanation: First, calculate the double-declining rate: (1 / 5 years) * 2 = 40%. For Year 1, depreciation is $200,000 (initial cost) × 40% = $80,000. Salvage value is ignored in the initial calculation. The book value at the beginning of Year 2 is $200,000 - $80,000 = $120,000. For Year 2, depreciation is the book value × the rate: $120,000 × 40% = $48,000. The journal entry is a debit to Depreciation Expense and a credit to Accumulated Depreciation for $48,000.