P$3-6($Algo$)$ Analyzing the Effects of Transactions Using T$-$Accounts, Preparing an Income Statement, and Evaluating the Net Profit Margin Ratio LO$3-4,3-5,3-6$

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

Account Balance Account Balance

Property, plant, and equipment $($net$)$ $$17,894$ Receivables $$2,549$

Retained earnings $13,606$ Other current assets $1,079$

Accounts payable $1,657$ Cash $1,284$

Prepaid expenses $308$ Spare parts, supplies, and fuel $794$

Accrued expenses payable $2,470$ Other non$-$current liabilities $3,890$

Long$-$term notes payable $1,890$ Other current liabilities $2,339$

Other non$-$current assets $3,152$ Additional Paid$-$in Capital $1,207$

Common stock $($$$0\mathrm{.}01$ par value$)1$

These accounts are not necessarily in good order and have normal debit or credit balances. $($Note: Because these are not all of UPS's accounts, these will not balance in a trial balance.$)$ Assume the following transactions $($in millions, except for par value$)$ occurred the next fiscal year beginning January $1($the current year$)$:

Provided delivery service to customers, who paid $$11,390$ in cash and owed $$38,304$ on account.

Purchased new equipment costing $$3,834$; signed a long$-$term note.

Paid $$11,864$ cash to rent equipment and aircraft, with $$6,136$ for rent this year and the rest for rent next year $($a prepaid expense$).$

Spent $$1,264$ cash to repair facilities and equipment during the year.

Collected $$36,285$ from customers on account.

Repaid $$350$ on a long$-$term note $($ignore interest$).$

Issued $200$ million additional shares of $$0\mathrm{.}01$ par value stock for $$36($that$$s $$36$ million$).$

Paid employees $$14,276$ for work during the year.

Purchased spare parts, supplies, and fuel for the aircraft and equipment for $$12,564$ cash.

Used $$7,450$ in spare parts, supplies, and fuel for the aircraft and equipment during the year.

Paid $$1,184$ on accounts payable.

Ordered $$128$ in spare parts and supplies.

Required:

Prepare journal entries for each transaction.

Enter the ending balances from December $31$ as the respective beginning balances for January $1$ of the current year. Record in the T$-$accounts the effects of each transaction. Label each using the letter of the transaction.

Prepare an unadjusted income statement for the current year ended December $31.$

Compute the company's net profit margin ratio for the current year ended December $31.$