• William Boeing founded Pacific Aero Products Company in 1916; the name was changed to Boeing
in 1917.
• In 1917, the company employed 28 people. In 2007, Boeing employed more than 150,000 people in
48 U.S. states and 70 foreign countries.
• Boeing is the largest contractor working for NASA.
• Along with the ISS, the Boeing Company manufactures and services commercial airplanes, military
aircraft, helicopters, a variety of electronic defense systems, and advanced communication systems.
• Boeing’s 2006 sales were $61.5 billion from customers in 145 countries. International sales accounted
for nearly 30 percent of total sales.
Assets are depreciated because they have a limited life and will be used up over time. Depreciation is
the allocation of the cost of the asset over its useful life.
1. Debit Depreciation Expense—Machine, $250; Credit Accum. Depr. – Machine, $250.
3. Expense items that are acquired and paid for in advance of their use.
Supplies, prepaid rent, prepaid insurance, and advertising.
5. b, d, f, g, and i are depreciated. Only long-term tangible assets are subject to depreciation.
7. a. decrease b. none c. none d. decrease
9. Asset cost, accumulated depreciation, book value.
11. Cost of asset less accumulated depreciation.
13.
ADJUSTMENTS AND THE WORKSHEET
CHAPTER 5
Students should suggest that accountants estimate the amount of wear and tear on the equipment. This
expense should be charged against the income earned during that same period. The concept of adjustments
and depreciation can be introduced at this time.
Fast Facts
Charges off an equal amount of cost of asset during each accounting period in asset’s useful life.
Discussion Questions
Chapter Opener: Thinking Critically
Managerial Implications: Thinking Critically
Note to instructor : These questions are designed to check students’ understanding of new terms, concepts,
and procedures presented in the chapter.
EXERCISE 5.1
1. Rent Expense, $900 Dr.
2. Supplies Expense, $4,400 Dr.
3. Depreciation Expense—Equipment, $500 Dr.
EXERCISE 5.2
1. Insurance Expense, $250 Dr.
2. Advertising Expense, $1,250 Dr.
EXERCISE 5.3
1 Cash 62 0 0 0 00 62 0 0 0 00 1
2 Accounts Receivable 21 5 0 0 00 21 5 0 0 00 2
3 Supplies 800000 (a) 5 2 0 0 00 2 8 0 0 00 3
4 Prepaid Insurance 720000 (b) 1 8 0 0 00 5 4 0 0 00 4
17 17
18 18
19 19
20 20
21 21
22 22
Herron Company
Worksheet (Partial)
Month Ended January 31, 2013
ACCOUNT NAME TRIAL BALANCE
DEBIT CREDIT
ADJUSTMENTS
DEBIT CREDIT
ADJUSTED TRIAL BALANCE
DEBIT CREDIT
EXERCISE 5.4
Net Income Before Adjustments $80,000
Less Adjustments:
EXERCISE 5.5
PAGE
POST.
REF.
1 1
2 2013 2
3 Dec. 31 Supplies Expense 523 1000000 3
Adjusting Entries
3
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL
EXERCISE 5.5 (continued)
ACCOUNT Supplies ACCOUNT NO.
ACCOUNT Prepaid Insurance ACCOUNT NO.
2013
ACCOUNT Accumulated Depreciation—Equipment ACCOUNT NO.
ACCOUNT Depreciation Expense—Equipment ACCOUNT NO.
2013
CREDIT
DESCRIPTION
POST.
REF. DEBIT
BALANCE
131
GENERAL LEDGER
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT
121
DATE DESCRIPTION
POST.
REF. DEBIT
DATE DESCRIPTION
POST.
REF. DEBIT
DATE
142
517
CREDIT
BALANCE
DEBIT CREDIT
BALANCE
DEBIT CREDIT
CREDIT
CREDIT
CREDIT DEBIT
EXERCISE 5.5 (continued)
ACCOUNT Insurance Expense ACCOUNT NO.
2013
ACCOUNT Supplies Expense ACCOUNT NO.
2013
DESCRIPTION
DEBIT
GENERAL LEDGER
CREDITDATE
BALANCE
DEBIT
DATE DESCRIPTION CREDIT CREDIT
521
523
POST.
REF. CREDIT
BALANCE
DEBIT
POST.
REF. DEBIT
PROBLEM 5.1A
Dumas Company
Worksheet (Partial)
Month Ended January 31, 2013
1 Cash 10400000
2 Accounts Receivable 2080000
3 Supplies 3840000 (a) 32 0 0 0 00
4 Prepaid Insurance 6000000 (b) 10 0 0 0 00
18
19
ACCOUNT NAME
ADJUSTMENTS
DEBIT CREDIT
TRIAL BALANCE
CREDITDEBIT
PROBLEM 5.1A (continued)
10400000 10400000 1
2080000 2080000 2
640000 640000 3
3200000 3200000 11
1000000 1000000 12
3120000 3120000 13
220000 220000 14
ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
PROBLEM 5.2A
The University Bookstore
Worksheet (Partial)
1 Cash 45 1 5 0 00
2 Accounts Receivable 662400
3 Supplies 12 0 0 0 00 (a) 4 8 0 0 00
4 Prepaid Rent 42 0 0 0 00 (b) 6 0 0 0 00
Month Ended November 30, 2013
ACCOUNT NAME
TRIAL BALANCE ADJUSTMENTS
DEBIT CREDIT DEBIT CREDIT
PROBLEM 5.2A (continued)
45 1 5 0 00 1
662400 2
ADJUSTED TRIAL
BALANCE INCOME STATEMENT BALANCE SHEET
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
PROBLEM 5.3A
7950 000
1680000
10800 000
5130000
Ted Coe, Capital, December 1, 2013
Net income for December
Month Ended December 31, 2013
Orange Corporation
Statement of Owner’s Equity
Expenses
Salaries Expense
Orange Corporation
Income Statement
Month Ended December 31, 2013
Revenue
Fees Income
PROBLEM 5.3A (continued)
Cash 7720000
Accounts Receivable 1200000
Supplies 410000
Prepaid Advertising 1200000
Equipment 6000000
Orange Corporation
Balance Sheet
December 31, 2013
Assets
PROBLEM 5.4A
Palmer Creative Designs
Worksheet
1 Cash 35 5 0 0 00
2 Accounts Receivable 12 6 0 0 00
3 Supplies 7 7 5 0 00 (a) 6 6 5 0 00
4 Prepaid Advertising 8 4 0 0 00 (b) 2 1 0 0 00
5 Prepaid Rent 19 2 0 0 00 (c) 1 6 0 0 00
20
21
Month Ended January 31, 2013
ACCOUNT NAME
TRIAL BALANCE ADJUSTMENTS
DEBIT CREDIT DEBIT CREDIT
PROBLEM 5.4A (continued)
35 5 0 0 00 35 5 0 0 00 1
12 6 0 0 00 12 6 0 0 00 2
110000 110000 3
630000 630000 4
ADJUSTED TRIAL INCOME STATEMENT BALANCE SHEET
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
PROBLEM 5.4A (continued)
4760000
970000
6000000
2597000
700000
1897000
7897000
Revenue
Fees Income
Palmer Creative Designs
Income Statement
Month Ended January 31, 2013
Statement of Owner’s Equity
Month Ended January 31, 2013
Expenses
Salaries Expense
Less Withdrawals for January
Increase in Capital
Sadie Palmer, Capital, January 31, 2010
Palmer Creative Designs
Sadie Palmer, Capital, January 1, 2010
Net income for January
PROBLEM 5.4A (continued)
Cash 3550000
Accounts Receivable 1260000
Supplies 110000
Prepaid Advertising 630000
PAGE
POST.
REF.
P
O
1 1
2 2013 2
3 Jan. 31 Supplies Expense 517 6 6 5 0 00 3
4 Supplies 121 665000 4
14 14
DESCRIPTION
January 31, 2013
Adjusting Entries
3
Palmer Creative Designs
Balance Sheet
DEBIT CREDIT
Assets
DATE
GENERAL JOURNAL
PROBLEM 5.4A (continued)
ACCOUNT Supplies ACCOUNT NO.
ACCOUNT Prepaid Advertising ACCOUNT NO.
2013
ACCOUNT Prepaid Rent ACCOUNT NO.
ACCOUNT Accumulated Depreciation—Equipment ACCOUNT NO.
CREDIT
DESCRIPTION
POST.
REF. DEBIT
BALANCE
130
GENERAL LEDGER
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT
121
DATE DESCRIPTION
POST.
REF. DEBIT
DATE DESCRIPTION
POST.
REF. DEBIT
DATE
131
142
CREDIT
BALANCE
DEBIT CREDIT
BALANCE
DEBIT CREDIT
CREDIT
CREDIT
CREDIT DEBIT
PROBLEM 5.4A (continued)
ACCOUNT Supplies Expense ACCOUNT NO.
ACCOUNT Advertising Expense ACCOUNT NO.
ACCOUNT Rent Expense ACCOUNT NO.
ACCOUNT Depreciation Expense—Equipment ACCOUNT NO.
2013
517
520
GENERAL LEDGER
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
CREDIT
BALANCE
DEBIT
519
CREDIT
CREDITDATE DESCRIPTION
POST.
REF. DEBIT
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
DATE DESCRIPTION
POST.
REF. DEBIT
BALANCE
DEBIT
BALANCE
DEBIT
CREDIT
523
CREDIT
PROBLEM 5.1B
Torres Company
Worksheet
1 Cash 36 5 0 0 00
2 Accounts Receivable 320000
3 Supplies 210000 (a) 1 0 0 0 00
4 Prepaid Rent 12 0 0 0 00 (b) 1 0 0 0 00
5 Equipment 23 0 0 0 00
19
20
21
Month Ended February 28, 2013
CREDITACCOUNT NAME
TRIAL BALANCE ADJUSTMENTS
DEBIT CREDIT DEBIT
36 5 0 0 00 36 5 0 0 00 1
320000 320000 2
110000 110000 3
CREDIT DEBIT CREDIT
PROBLEM 5.1B (continued)
ADJUSTED TRIAL INCOME STATEMENT BALANCE SHEET
DEBIT CREDIT DEBIT