Question

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 Account Balance Property and equipment (net) $ 15,543 Receivables $ 4,581 Retained earnings 12,716 Other current assets 610 Accounts payable 1,702 Cash 2,328 Prepaid expenses 329 Spare parts, supplies, and fuel 437 Accrued expenses payable 1,894 Other noncurrent liabilities 5,616 Long-term notes payable 1,667 Other current liabilities 1,286 Other noncurrent assets 3,557 Additional Paid-in Capital 2,472 Common stock ($0.10 par value) 32 These accounts are not necessarily in good order and have normal debit or credit balances. 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&2 Prepare T-accounts for May 31, 2014, from the preceding list; Enter the respective beginning balances. For each transaction, record the 2015 effects in the T-accounts. Label each using the letter of the transaction.Compute ending balances. (Enter your answers in millions not in dollars.)3. Prepare an income statement for the period ended May 31, 2015. (Enter your answers in millions not in dollars.)

Answer 1

FedEx

1&2: T-accounts:

Cash

Account Titles Debit Credit

('millions) ('millions)

Balance 2,328

a. Delivery Service Revenue 17,600

c. Prepaid Expenses 3,728

c. Rent Expenses 10,136

d. Repairs Expenses 3,864

e. Accounts Receivable 24,285

f. Long-term Note Payable 350

g. Common stock 2

g. APIC 14

h. Salaries 15,276

i. Fuel Expenses 8,564

j. Accounts Payable 784

Balance 1,527

Prepaid expenses

Account Titles Debit Credit

('millions) ('millions)

Balance 329

c. Cash 3,728

Balance 4,057

Spare parts, supplies, and fuel

Account Titles Debit Credit

('millions) ('millions)

Balance 437

Accounts Receivables

Account Titles Debit Credit

('millions) ('millions)

Balance 4,581

a. Delivery Service Revenue 21,704

e. Cash 24,285

Balance 2,000

Other current assets

Account Titles Debit Credit

('millions) ('millions)

Balance 610

Property and equipment (net)

Account Titles Debit Credit

('millions) ('millions)

Balance 15,543

b. Long-term Note Payable 3,434

Balance 18,977

Other noncurrent assets

Account Titles Debit Credit

('millions) ('millions)

Balance 3,557

Accounts payable

Account Titles Debit Credit

('millions) ('millions)

Balance 1,702

j. Cash 784

Balance 918

Accrued expenses payable

Account Titles Debit Credit

('millions) ('millions)

Balance 1,894

Other current liabilities

Account Titles Debit Credit

('millions) ('millions)

Balance 1,286

Long-term notes payable

Account Titles Debit Credit

('millions) ('millions)

Balance 1,667

b. Property and Equipment 3,434

f. Cash 350

Balance 4,751

Other noncurrent liabilities

Account Titles Debit Credit

('millions) ('millions)

Balance 5,616

Common stock ($0.10 par value)

Account Titles Debit Credit

('millions) ('millions)

Balance 32

g. Cash 2

Balance 34

Additional Paid-in Capital

Account Titles Debit Credit

('millions) ('millions)

Balance 2,472

g. Cash 14

Balance 2,486

Retained earnings

Account Titles Debit Credit

('millions) ('millions)

Balance 12,716

Delivery Service Revenue

Account Titles Debit Credit

('millions) ('millions)

a. Accounts receivable 21,704

a. Cash 17,600

Balance 39,304

Rent Expense

Account Titles Debit Credit

('millions) ('millions)

c. Cash 10,136

Repairs Expense

Account Titles Debit Credit

('millions) ('millions)

d. Cash 3,864

Salaries Expense

Account Titles Debit Credit

('millions) ('millions)

h. Cash 15,276

Fuel Expense

Account Titles Debit Credit

('millions) ('millions)

i. Cash 8,564

3. Income Statement for the year ended May 31, 2015:

Delivery Service Revenue 39,304

Rent Expense 10,136

Repair Expense 3,864

Salaries Expense 15,276

Fuel Expense 8,564 37,840

Net Income 1,464

Step-by-step explanation:

a) Account Balances on May 31, 2014:

Trial Balance as of May 31, 2014:

Account Titles Debit Credit

('millions) ('millions)

Cash 2,328

Prepaid expenses 329

Spare parts, supplies, and fuel 437

Receivables 4,581

Other current assets 610

Property and equipment (net) 15,543

Other noncurrent assets 3,557

Accounts payable 1,702

Accrued expenses payable 1,894

Other current liabilities 1,286

Long-term notes payable 1,667

Other noncurrent liabilities 5,616

Common stock ($0.10 par value) 32

Additional Paid-in Capital 2,472

Retained earnings 12,716

Totals $27,385 $27,385

Other transactions for year ending May 31, 2015:

a. Delivery Service Revenue $21,704 Account Receivable $21,704

Delivery Service Revenue $17,600 Cash $17,600

b. Equipment $3,434 Long-term Note Payable $3,434

c. Rent Expense $10,136; Prepaid (Rent) Expense $3,720 Cash $13,864

d. Repair Expenses $3,864 Cash $3,864

e. Cash $24,285 Accounts Receivable $24,285

f. Long-term Note Payable $350 Cash $350

g. Cash $16 Common Stock $2 APIC $14

h. Salaries Expense $15,276 Cash $15,276

i. Fuelling Expense $8,564 Cash $8,564

j. Accounts Payable $784 Cash $784

k. N/A

Trial Balance as of May 31, 2015:

Account Titles Debit Credit

('millions) ('millions)

Cash 1,527

Prepaid expenses 4,057

Spare parts, supplies, and fuel 437

Receivables 2,000

Other current assets 610

Property and equipment (net) 18,977

Other noncurrent assets 3,557

Accounts payable 918

Accrued expenses payable 1,894

Other current liabilities 1,286

Long-term notes payable 4,751

Other noncurrent liabilities 5,616

Common stock ($0.10 par value) 34

Additional Paid-in Capital 2,486

Retained earnings 12,716

Delivery Service Revenue 39,304

Rent Expense 10,136

Repair Expense 3,864

Salaries Expense 15,276

Fuel Expense 8,564

Totals $69,005 $69,005