Question

Required information P3-6 (Algo) Analyzing the Effects of Transactions Using T-Accounts, Preparing an Income Statement, and Evaluating the Net Profit Margin Ratio L03-4, 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 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 Account $ 18,694 Receivables 14,406 Other current assets 1,737 Cash 348 Spare parts, supplies, and fuel 2,550 Other noncurrent liabilities 1,970 Other current liabilities 3,272 Additional Paid-in Capital 5 Balance $ 2,749 1,119 1,364 878 4,010 2,419 1,327 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):

Answer 1

1. Journal Entries -

Date Credit a State Ex Journal Entries ($' in Millions) Accounts Title Debit Cash $ 13,390 Receivables $ 41,504 Delivery Service Revenue (Being Delivery Service Revenue Earned) $ 54,894 b Property and Equipment (net) $ 3,914 Long Term Notes Payable (Being Equipment purchsaed and signed notes) $ 3,914 с $ 5,928 $ 6,736 Prepaid Expenses Rent Expense Cash (Being Rent Expense incurred) $ 12,664 d Repair Expense $ 1,344 Cash (Being Repair Expense incurred) $ 1,344 e Cash $ 38,685 Receivable (Being Amount received on account) $ 38,685 f $ 390 Long Term Notes Payable Cash (Being long term notes paid) $ 390 $ 40 26 Cash Common Stock Additional Paid in Capital (Being common Stock issued) $ $ 14 h $ 15,276 Wages Expense Cash (Being Wages Expense paid) $ 15,276 i $ 13,764 Spare parts Supplies and Fuel Cash (Being Supplies Purchased) $ 13,764 j Spare parts Supplies and Fuel Expenses $ 7,650 Spare parts Supplies and Fuel (Being Spare parts Supplies and Fuel Used) $ 7,650 k Accounts Payable $ 1,264 Cash (Being Payment made on accounts) $ 1,264 1 No Entry

2. Ledgers -

Beg. Bal Beg. Bal a e с d e Receivable $ 2,749 $ 38,685 $41,504 a Cash $ 1,364 $ 12,664 $ 13,390 $ 1,344 $ 38,685 $ 390 $ 40 $ 15,276 $ 13,764 $ 1,264 f h i End Bal $ 5,568 k End Bal $ 8,777 Beg. Bal Prepaid Expenses $ 348 $ 5,928 $ 53,479 $ 44,702 с End Bal $ 348 Beg. Bal Spare parts Supplies and Fuel $ 878 $ 7,650 $ 13,764 j End Bal $ 878 Beg. Bal Property and Equipment (net) $ 18,694 b $ 3,914 End Bal $ 22,608 Other Current Assets $ 1,119 Beg. Bal End Bal $ 1,119 Beg. Bal Accounts Payable $ 1,737 $ 1,264 k End Bal $ 473 Other Noncurrent Assets Beg. Bal $ 3,272 Other Current Liabilities Beg. Bal $ 2,419 End Bal $ 3,272 End Bal $ 2,419 Accrued Expense Payable Beg. Bal $ 2,550 Other Noncurrent Liabilities $ 4,010 End Bal $ 2,550 Beg. Bal End Bal $ 4,010 Long Term Notes Payable Beg. Bal $ 1,970 f $ 390$ 3,914 b End Bal $ 5,494 Additional Paid in Capital Beg. Bal $ 1,327 $ 14 End Bal $ 1,341 Beg. Bal Common Stock $ 5 $ 26 End Bal Delivery Service Revenue Beg. Bal $ 54,894 a End Bal $ 54,894 Retained Earnings $ 14,406 Beg. Bal Repair Expense End Bal $ 14,406 Beg. Bal d $ 1,344 Rent Expense End Bal $ 1,344 Beg. Bal с $ 6,736 Spare parts Supplies and Fuel Expenses Beg. Bal j $ 7,650 End Bal $ 6,736 Wages Expense End Bal $ 7,650 Beg. Bal h $ 15,276 End Bal $ 15,276

3. Income Statement -

State Ex Income Statement For the current Year Ended May 31 $'in Millions Delivery Service Revenue $ 54,894 Expenses: Rent Expense $ 6,736 Repair Expense $ 1,344 Spare parts Supplies and Fuel Expenses $ 7,650 Wages Expense $ 15,276 Total Expenses $ 31,006 Net Income $ 23,888