Following are account balances (in millions of dollars) from a recent FedEx annual report, followed by several typical transactions. Assume that the following are account balances on May 31, 2014:

These accounts are not necessarily in good order and have normal debit or credit balances. Assume the following transactions (in millions) occurred the next year ending May 31, 2015:
a. Provided delivery service to customers, receiving $21,704 in accounts receivable and $17,600 in cash.
b. Purchased new equipment costing $3,434; signed a long-term note.
c. Paid $13,864 cash to rent equipment and aircraft, with $10,136 for rental this year and the rest for rent next year.
d. Spent $3,864 cash to maintain and repair facilities and equipment during the year.
e. Collected $24,285 from customers on account.
f. Repaid $350 on a long-term note (ignore interest).
g. Issued 20 shares of additional stock for $16.
h. Paid employees $15,276 during the year.
i. Purchased for cash and used $8,564 in fuel for the aircraft and equipment during the year.
j. Paid $784 on accounts payable.
k. Ordered $88 in spare parts and supplies.

Required:
1. Prepare T-accounts for May 31, 2014, from the preceding list; enter the respective beginning balances. You will need additional T-accounts for income statement accounts; enter zero for beginning balances.
2. For each transaction, record the 2015 effects in the T-accounts. Label each using the letter of the transaction. Compute ending balances.
3. Prepare an income statement for the period ended May 31, 2015.
4. Compute the company’s net profit margin ratio for the year ended May 31, 2015. What does it suggest to you aboutFedEx?

Transcribed Image Text:

Account Balance Account Balance Property and equipment (net $15,543 Retained earnings Accounts payable Prepaid expenses Accrued expenses payable Long-term notes payable Other noncurrent assets Common stock (S0.10 par value) Receivables $4,581 610 2,328 437 5,616 1.286 2,472 12,716 Other current assets 1,702 Cash 329 Spare parts, supplies, and fuel 894 Other noncurrent liabilities 1667 Other current liabilities 3,557 Additional paid-in capital 32