The journal entry
simulation, worked
Journal entry simulation CPA questions are graded cell by cell: you pick each account from a list and put an amount on one side, and each line is marked on its own. That structure is the reason the useful thing to study is not “how to do journal entries” but which specific wrong amount each misunderstanding produces — because on a discount bond, three of the four plausible answers are numbers you can find somewhere in the fact pattern. Below is one of our own simulations printed in full, with the misconception behind every wrong figure.
Source: AICPA, CPA Exam toolkit — exam structure and scoring · checked 2026-08-15 · simulations and the structure of the exam
A journal entry simulation CPA candidates actually sit, line by line
This is our own simulation, written against the public Blueprint. It is not an AICPA question and it is not taken from any review course.
Nolan Corp. — bond terms
Issued 1 January Year 1. Face amount $500,000. Stated coupon rate 6%, paid annually every 31 December. Market rate at issuance 8%. Term five years. Effective interest method. Proceeds received at issuance: $460,073. The discount is therefore $500,000 − $460,073 = $39,927.
Prepare the 31 December Year 1 journal entry.
| Line | Account | Debit | Credit |
|---|---|---|---|
| 1 | Interest expense | 36,806 | — |
| 2 | Discount on bonds payable | — | 6,806 |
| 3 | Cash | — | 30,000 |
The arithmetic. Interest expense is the opening carrying amount times the market rate at issuance: $460,073 × 8% = $36,806. Cash is the face amount times the stated rate: $500,000 × 6% = $30,000. The discount amortised is the difference between the two, $6,806, and it is a credit because the discount is a contra-liability carrying a debit balance — reducing it takes a credit. After the entry the carrying amount rises from $460,073 to $466,879, on its way to the $500,000 that has to be repaid.
The three wrong answers, and what each one means
This is the part no occupant of this query writes down, and it is the part that is worth studying. Each figure below is one a real candidate produces, and each encodes a different misunderstanding — so each deserves a different first question rather than the same explanation.
$30,000 as interest expense — coupon_as_expense
“The $30,000 you entered is the cash paid out this year. But the bonds were issued at a discount — Nolan received only $460,073 and must repay $500,000. Is that extra repayment a cost of borrowing? If it is, should it be part of interest expense?”
$37,985 as interest expense — straight_line_amortization
“Your figure is $30,000 + $39,927 / 5. The problem states plainly that Nolan uses the effective interest method. Under that method, interest expense is what multiplied by what?”
Premium on bonds payable instead of Discount — discount_vs_premium
“Start qualitatively: the market rate of 8% is above the coupon rate of 6%, so were investors willing to pay more or less? They paid less — is that difference called a discount or a premium?”
To be precise about what happens next: the exchange is a rate limit, not a gate. Answering well gets you to the full worked explanation in three or four exchanges; answering badly still gets you there. And if you would rather skip it, asking three times gets you the walkthrough.
What the structure of the entry rewards
Cell-by-cell grading means a partial entry is worth something. The three lines above are marked independently, so getting the cash line right earns its cell even if the expense line is wrong. The practical consequence is that leaving a line blank is the one move with no upside — a defensible figure derived from the right method is sometimes marked; an empty cell never is.
Our grader matches on the account, not the row. In our simulations you can enter interest expense on the first line or the third and it is marked the same, which also makes “used the wrong account” a diagnosable error in its own right rather than a formatting complaint. unverified How the exam itself treats row order is not something we have checked against a primary AICPA source, so we state this about our own grading contract and not about the exam.
The par times are per cell, not per simulation. Our budget for this one is 300 seconds on the expense line, 240 on the discount line and 120 on the cash line, inside a 20-minute simulation. A candidate who spends nine minutes on the first line has not lost the first line; they have lost the third. That failure has a name and three siblings →
Common questions
What is a journal entry simulation on the CPA exam?
A task-based simulation in which you build a journal entry rather than answer a multiple-choice question: you select each account from a provided list and enter an amount in either the debit or the credit column. It is graded cell by cell, so a partially correct entry is not automatically a zero, and one wrong account does not necessarily take the whole entry with it.
Does row order matter in a journal entry simulation?
In our own simulations it does not: the grading contract matches on the account, not on the row the line was typed into. We have not verified how the exam itself treats row order against a primary AICPA source, so we scope that claim to our own product rather than stating it about the exam.
What is the most common error on a bond journal entry TBS?
Using the coupon payment as interest expense. Under the effective interest method the expense is the opening carrying amount times the market rate at issuance, and the coupon only determines the cash paid. In the worked item below that error produces $30,000 instead of $36,806 — a figure that is present in the fact pattern and therefore looks right.
Related
Bonds payable, the Blueprint group this sits in → · The document review simulation → · The research simulation →
Source: NASBA, “CPA Examination” · checked 2026-08-15 · exam sections and administration