Question
P3-6 (Algo) 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 [The following
P3-6 (Algo) 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
[The following information applies to the questions displayed below.]
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):
- Provided delivery service to customers, who paid $6,390 in cash and owed $30,304 on account.
- Purchased new equipment costing $3,634; signed a long-term note.
- Paid $9,864 cash to rent equipment and aircraft, with $4,636 for rent this year and the rest for rent next year.
- Spent $1,064 cash to repair facilities and equipment during the year.
- Collected $30,285 from customers on account.
- Repaid $250 on a long-term note (ignore interest).
- Issued 120 million additional shares of $0.10 par value stock for $26 (thats $26 million).
- Paid employees $11,776 for work during the year.
- Purchased spare parts, supplies, and fuel for the aircraft and equipment for $9,564 cash.
- Used $6,950 in spare parts, supplies, and fuel for the aircraft and equipment during the year.
- Paid $984 on accounts payable.
- Ordered $108 in spare parts and supplies.
P3-6 Part 1
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.)
P3-6 Part 2
2. Prepare T-account for may 31 of the current year.
P3-6 Part 3
3. Prepare an income statement for the current year ended may 31.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started