HBS CORE - FINANCIAL ACCOUNTING - ADJUSTING
JOURNAL MID TERM EXAM ENTRIES WITH
COMPLETE SOLUTIONS
HBS CORE – FINANCIAL ACCOUNTING MIDTERM EXAM
SECTION I – MULTIPLE CHOICE (4 points each – 40 points total)
1. On September 1, a company paid $18,000 for 6 months of rent. What is the
adjusting entry on December 31?
A) Dr Rent Expense 6,000/CrPrepaidRent6,000/CrPrepaidRent6,000
B) Dr Rent Expense 12,000/CrPrepaidRent12,000/CrPrepaidRent12,000
C) Dr Prepaid Rent 12,000/CrRentExpense12,000/CrRentExpense12,000
D) Dr Rent Expense 18,000/CrCash18,000/CrCash18,000
2. On October 1, a law firm received $24,000 for a 12-month retainer. On
December 31, what is the adjusting entry?
A) Dr Unearned Revenue 6,000/CrServiceRevenue6,000/CrServiceRevenue6,000
B) Dr Service
Revenue 6,000/CrUnearnedRevenue6,000/CrUnearnedRevenue6,000
C) Dr Unearned
Revenue 18,000/CrServiceRevenue18,000/CrServiceRevenue18,000
D) No entry needed
, 3. A company has a weekly payroll of $50,000 (Monday–Friday). December 31 falls
on a Wednesday. The last payday was December 26 (Friday). What is the adjusting
entry?
A) Dr Salaries Expense 30,000/CrCash30,000/CrCash30,000
B) Dr Salaries Expense 30,000/CrSalariesPayable30,000/CrSalariesPayable30,000
C) Dr Salaries Expense 20,000/CrSalariesPayable20,000/CrSalariesPayable20,000
D) Dr Salaries Payable 30,000/CrSalariesExpense30,000/CrSalariesExpense30,000
4. Which of the following is an example of an accrued expense?
A) Prepaid insurance
B) Unearned subscription revenue
C) Salaries earned by employees but not yet paid
D) Depreciation on equipment
5. A company forgets to record an adjusting entry for accrued interest revenue.
What is the effect on the financial statements?
A) Assets understated, revenues understated
B) Assets overstated, revenues overstated
C) Liabilities understated, revenues understated
D) No effect
6. Equipment cost 120,000,salvagevalue120,000,salvagevalue20,000, useful life 5
years. Straight-line depreciation. The adjusting entry for one full year is:
A) Dr Depreciation
Expense 24,000/CrAccumulatedDepreciation24,000/CrAccumulatedDepreciation2
4,000
B) Dr Depreciation
Expense 20,000/CrAccumulatedDepreciation20,000/CrAccumulatedDepreciation2
JOURNAL MID TERM EXAM ENTRIES WITH
COMPLETE SOLUTIONS
HBS CORE – FINANCIAL ACCOUNTING MIDTERM EXAM
SECTION I – MULTIPLE CHOICE (4 points each – 40 points total)
1. On September 1, a company paid $18,000 for 6 months of rent. What is the
adjusting entry on December 31?
A) Dr Rent Expense 6,000/CrPrepaidRent6,000/CrPrepaidRent6,000
B) Dr Rent Expense 12,000/CrPrepaidRent12,000/CrPrepaidRent12,000
C) Dr Prepaid Rent 12,000/CrRentExpense12,000/CrRentExpense12,000
D) Dr Rent Expense 18,000/CrCash18,000/CrCash18,000
2. On October 1, a law firm received $24,000 for a 12-month retainer. On
December 31, what is the adjusting entry?
A) Dr Unearned Revenue 6,000/CrServiceRevenue6,000/CrServiceRevenue6,000
B) Dr Service
Revenue 6,000/CrUnearnedRevenue6,000/CrUnearnedRevenue6,000
C) Dr Unearned
Revenue 18,000/CrServiceRevenue18,000/CrServiceRevenue18,000
D) No entry needed
, 3. A company has a weekly payroll of $50,000 (Monday–Friday). December 31 falls
on a Wednesday. The last payday was December 26 (Friday). What is the adjusting
entry?
A) Dr Salaries Expense 30,000/CrCash30,000/CrCash30,000
B) Dr Salaries Expense 30,000/CrSalariesPayable30,000/CrSalariesPayable30,000
C) Dr Salaries Expense 20,000/CrSalariesPayable20,000/CrSalariesPayable20,000
D) Dr Salaries Payable 30,000/CrSalariesExpense30,000/CrSalariesExpense30,000
4. Which of the following is an example of an accrued expense?
A) Prepaid insurance
B) Unearned subscription revenue
C) Salaries earned by employees but not yet paid
D) Depreciation on equipment
5. A company forgets to record an adjusting entry for accrued interest revenue.
What is the effect on the financial statements?
A) Assets understated, revenues understated
B) Assets overstated, revenues overstated
C) Liabilities understated, revenues understated
D) No effect
6. Equipment cost 120,000,salvagevalue120,000,salvagevalue20,000, useful life 5
years. Straight-line depreciation. The adjusting entry for one full year is:
A) Dr Depreciation
Expense 24,000/CrAccumulatedDepreciation24,000/CrAccumulatedDepreciation2
4,000
B) Dr Depreciation
Expense 20,000/CrAccumulatedDepreciation20,000/CrAccumulatedDepreciation2
