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:

Account

Balance

Property and equipment (net)

15,543

Retained earnings

12,716

Accounts payable

1,702

Prepaid expenses

329

Accrued expenses payable

1,894

Long-term notes payable

1,667

Other noncurrent assets

3,557

Common stock ($0.10 par value)

32

Receivables

4,581

Other current assets

610

Cash

2,328

Spare parts, supplies, and fuel

437

Other noncurrent liabilities

5,616

Other current liabilities

1,286

Additional paid-in capital

2,472

These accounts are not necessarily in good order. 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.The accounts from above along with the beginning balances for the 2015 fiscal year are listed below. .

2. For each transaction, record the 2015 effects of the above transactions. Label each using the letter of the transaction. Record increases in the account as positive and decreases in the account as negative. The first transaction has been completed as an example.

3. Compute the ending balance in each account. Prepare an income statement and a classified balance sheet.

Property and equipment (net)

Retained earnings

Accounts payable

Other noncurrent assets

Beg Bal

15,543

Beg Bal

12,716

Beg Bal

1,702

Beg Bal

3,557

Prepaid expenses

Accrued expenses payable

Long-term notes payable

Cash

Beg Bal

329

Beg Bal

1,894

Beg Bal

1,667

Beg Bal

2,328

a

17,600

Other current assets

Common stock ($0.10 par value)

Receivables

Spare parts, supplies, and fuel

Beg Bal

610

Beg Bal

32

Beg Bal

4,581

Beg Bal

437

a

21,704

Other noncurrent liabilities

Other current liabilities

Delivery revenue

Additional paid-in capital

Beg Bal

5,616

Beg Bal

1,286

Beg Bal

0

Beg Bal

2,472

a

39,304

Rental Expense

Wages expense

Fuel Expense

Maintenance expense

Beg Bal

0

Beg Bal

0

Beg Bal

0

Beg Bal

0

3. Prepare an income statement and a classified balance sheet for the May 31, 2015 fiscal year.

4. Compute the company's net profit margin ratio for the year ended May 31, 2015. What does it suggest to you about FedEx?

Profit Margin =