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

These accounts are not necessarily in good order and have normal debit or credit balances. (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):
a. Provided delivery service to customers, who paid $1,390 in cash and owed $24,704 on account.
b. Purchased new equipment costing $3,434; signed a long-term note.
c. Paid $7,864 cash to rent equipment and aircraft, with $3,136 for rent this year and the rest for rent next year (a prepaid expense).
d. Spent $864 cash to repair facilities and equipment during the year.
e. Collected $24,285 from customers on account.
f. Repaid $150 on a long-term note (ignore interest).
g. Issued 200 million additional shares of $0.01 par value stock for $16 (that’s $16 million).
h. Paid employees $9,276 for work during the year.
i. Purchased spare parts, supplies, and fuel for the aircraft and equipment for $6,564 cash.
j. Used $6,450 in spare parts, supplies, and fuel for the aircraft and equipment during the year.
k. Paid $784 on accounts payable.
l. Ordered $88 in spare parts and supplies.

Required:
1. Prepare journal entries for each transaction. Use the account titles that UPS uses as listed above for balance sheet account effects.
2. Prepare T-accounts for the current year from the preceding list; enter the ending balances from December 31 as the respective beginning balances for January 1 of the current year. You will need additional T-accounts for income statement accounts; enter zero for beginning balances. Post the effects of the transactions in the T-accounts, and compute ending balances.
3. Prepare an unadjusted income statement for the current year ended December 31.
4. Compute the company’s net profit margin ratio for the current year ended December 31. Round your answer to two decimal places. What do the results suggest to you about UPS?

Transcribed Image Text:

Account Property, plant, and equipment (net) Retained earnings Accounts payable Prepaid expenses Accrued expenses payable Long-term notes payable Other non-current assets Common stock ($0.01 par value) Balance $30,482 9,105 5,555 108 2,552 21,320 1,082 9 Account Receivables Other current assets Cash Spare parts, supplies, and fuel Other non-current liabilities Other current liabilities Additional paid-in capital Balance $9,552 809 5,238 511 1,437 1,641 150