Analyzing the Effects of Transactions Using T-Accounts, Preparing an Income Statement, and Evaluating the Net Profit Margin Ratio LO3-4, 3-5, 3-6

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Following are account balances (in millions of dollars) from a recent StateEx annual report, followed by several typical transactions. Assume that the following are account balances on May 31 (end of the prior fiscal year):

Account	Balance			Account	Balance
Property and equipment (net)	$	15,894		Receivables	$	2,049
Retained earnings		11,606		Other current assets		979
Accounts payable		1,457		Cash		1,084
Prepaid expenses		208		Spare parts, supplies, and fuel		594
Accrued expenses payable		2,270		Other noncurrent liabilities		3,590
Long-term notes payable		1,690		Other current liabilities		2,139
Other noncurrent assets		2,852		Additional Paid-in Capital		907
Common stock ($0.10 par value)		1

These accounts are not necessarily in good order and have normal debit or credit balances. Assume the following transactions (in millions, except for par value) occurred the next fiscal year beginning June 1 (the current year):

1. Provided delivery service to customers, who paid $6,390 in cash and owed $30,304 on account.
2. Purchased new equipment costing $3,634; signed a long-term note.
3. Paid $9,864 cash to rent equipment and aircraft, with $4,636 for rent this year and the rest for rent next year.
4. Spent $1,064 cash to repair facilities and equipment during the year.
5. Collected $30,285 from customers on account.
6. Repaid $250 on a long-term note (ignore interest).
7. Issued 120 million additional shares of $0.10 par value stock for $26 (that’s $26 million).
8. Paid employees $11,776 for work during the year.
9. Purchased spare parts, supplies, and fuel for the aircraft and equipment for $9,564 cash.
10. Used $6,950 in spare parts, supplies, and fuel for the aircraft and equipment during the year.
11. Paid $984 on accounts payable.
12. Ordered $108 in spare parts and supplies.

Required:

1. Prepare journal entries for each transaction. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter amounts in millions, not dollars.)

2. Prepare T-account for may 31 of the current year.

3. Prepare an income statement for the current year ended may 31.

Answer rating: 100% (QA)

Journal Entry of StateEx in millions Date Account Title Debit Credit a Cash 6390 Receivables 30304 Delivery Service Revenue 36634 Being Delivery service revenue earned b Property and Equipment Net 363... View the full answer