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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):

  1. Provided delivery service to customers, who paid $6,390 in cash and owed $30,304 on account.
  2. Purchased new equipment costing $3,634; signed a long-term note.
  3. Paid $9,864 cash to rent equipment and aircraft, with $4,636 for rent this year and the rest for rent next year.
  4. Spent $1,064 cash to repair facilities and equipment during the year.
  5. Collected $30,285 from customers on account.
  6. Repaid $250 on a long-term note (ignore interest).
  7. Issued 120 million additional shares of $0.10 par value stock for $26 (thats $26 million).
  8. Paid employees $11,776 for work during the year.
  9. Purchased spare parts, supplies, and fuel for the aircraft and equipment for $9,564 cash.
  10. Used $6,950 in spare parts, supplies, and fuel for the aircraft and equipment during the year.
  11. Paid $984 on accounts payable.
  12. 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.

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