Question

Following are account balances (in millions of dollars) from a recent State Ex annual report, followed by several typical transactions. Assume that the following are account balances on May 31 (end of the prior fiscal year): Account Property and equipment (net) Retained earnings Accounts payable Prepaid expenses Accrued expenses payable Long-term notes payable Other noncurrent assets Common stock ($0.10 par value) Balance $ 15,494 11, 206 1,417 188 2,230 1,650 2,792 4 Account Receivables Other current assets Cash Spare parts, supplies, and fuel Other noncurrent liabilities Other current liabilities Additional Paid-in Capital Balance $ 1,949 959 1,044 557 3,530 2,099 847 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): a. Provided delivery service to customers, who paid $5,390 in cash and owed $28,704 on account. b. Purchased new equipment costing $3,594; signed a long-term note. c. Paid $9,464 cash to rent equipment and aircraft, with $4,336 for rent this year and the rest for rent next year. d. Spent $1,024 cash to repair facilities and equipment during the year. e. Collected $29,085 from customers on account. f. Repaid $230 on a long-term note (ignore interest). g. Issued 100 million additional shares of $0.10 par value stock for $24 (that's $24 million). h. Paid employees $11,276 for work during the year. i. Purchased spare parts, supplies, and fuel for the aircraft and equipment for $8,964 cash. j. Used $6,850 in spare parts, supplies, and fuel for the aircraft and equipment during the year. k. Paid $944 on accounts payable. I. Ordered $104 in spare parts and supplies. 2. Prepare T-accounts for the current year from the preceding list; enter the ending balances from May 31 as the respective beginning balances for June 1 of the current year. For each transaction, record the current year's transaction effects in the T-accounts. Label each using the letter of the transaction. (Enter your answers in millions, not in dollars.)

Answer 1

Amounts in Million Reference Credit Ledger Accounts Property & Equipment Description Beg. Balance Long term Note End. Balance Debit 15,494 3,594 Purchased by issue of note 19,088 19,088 19,088 Credit Reference Debit 1,044 5,390 29,085 Cash Description Beg. Balance Delivery Service Revenue Prepaid Rent Repair Expense Accounts Receivable Long Term Note Payable Common Stock Additional paid in Capital Wages Sapre, Fuel and Supplies Accounts Payable End. Balance 1 23 11,276 9,464 Rent paid in advance 1,024 Equipment repair Cash collected from Customer 230 Repayment of Note Stock Issued for Cash Stock Issued for Cash Wages paid 8,964 Cash purchase 944 26,193 46,819 46,819 Debit Delivery Service Revenue Description Accounts Receivable Cash End Balance Credit Reference 28,704 Credit Sales 5,390 Cash Sale 34,094 34,094 34,094 Debit Credit Reference Creidt Sale Accounts Receivable Description Beg. Balance Delivery service Revnue Cash End Balance 1,949 28,704 29,085 Cash collected from Customer 1,568 30,653 30,653 Debit Long term note Payable Description Beg. Balance Property and Equipment Cash End Balance Credit Reference 1,650 3,594 Purhcase of Equipment Repayment of Note 230 5,014 5,244 5,244 Credit Reference Prepaid Expense Description Beg. Balance Cash Rent Expense account End Balance Debit 188 9,464 Rent paid in advance 4,336 5,316 9,652 9,652

Rent Expense Description Debit Credit Reference Beg. Balance Prepaid Rent End Balance 4,336 Rent for the current year 4,336 4,336 4,336 Repair Expense Description Debit Credit Reference Beg. Balance Cash End Balance 1,024 Equipment repair 1,024 1,024 1,024 Common Stock Description Debit Credit Beg. Balance cash End Balance Reference 4 1 Stock issued for cash 5 5 5 Debit Additional Paid In capital Description Beg. Balance Cash End Balance Credit Reference 847 23 Stock issued for cash 870 870 870 Wage Expense Description Debit Credit Reference Beg. Balance Cash End Balance 11,276 Wages Paid 11,276 11,276 11,276 Credit Reference Sapre parts, Fuel and Supplies Description Beg. Balance Cash Sapre parts, Fuel and Supplies Expenses End Balance Debit 557 8,964 Cash purchase 6,850 Spare etc used during the year 2,671 9,521 9,521 Debit Credit Reference Sapre parts, Fuel and Supplies Expenses Description Beg. Balance Sapre parts, Fuel and Supplies End Balance 6,850 Spare etc used during the year 6,850 6,850 6,850 Debit Reference Account Payable Description Beg. Balance Cash End Balance Credit 1,417 Cash paid 944 473 1,417 1,417

Debit Reference Retained Earnings Description Beg. Balance End Balance Credit 11,206 11,206 11,206 11,206 Debit Reference Accrued Expenses payable Description Beg. Balance End Balance Credit 2,230 2,230 2,230 2,230 Credit Reference Other Non-Current Asset Description Beg. Balance End Balance Debit 2,792 2,792 2,792 2,792 Credit Reference Other Current Asset Description Beg. Balance End Balance Debit 959 959 959 959 Debit Reference Other Current Liablities Description Beg. Balance End Balance Credit 2,099 2,099 2,099 2,099 Debit Reference Other Non-Current Liablities Description Beg. Balance End Balance Credit 3,530 3,530 3,530 3,530

State Ex
Income Statement (Unadjusted)
	In Million
Description	Amount
Delivery service Revenue	34,094
Less: Operating Expense
Rent Expense	4,336
Repair Expenses	1,024
Wage Expenses	11,276
Spare, Fuel and Supplies Expenses	6,850
Net Profit	10,608

Net Profit Margin Ratio = (Net profit/Net Revenue) X 100
Net Profit     =	10,608
Net Revenue =	34,094
Net Profit Margin =	10,608/34,094 X 100
	31.1%