In: Accounting
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) | $ | 18,694 | Receivables | $ | 2,749 | |
Retained earnings | 14,406 | Other current assets | 1,119 | |||
Accounts payable | 1,737 | Cash | 1,364 | |||
Prepaid expenses | 348 | Spare parts, supplies, and fuel | 878 | |||
Accrued expenses payable | 2,550 | Other noncurrent liabilities | 4,010 | |||
Long-term notes payable | 1,970 | Other current liabilities | 2,419 | |||
Other noncurrent assets | 3,272 | Additional Paid-in Capital | 1,327 | |||
Common stock ($0.10 par value) | 5 | |||||
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):
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.)
1. Cash 13390
Debtors 41504
To Service for customers 54894
(which amount is received in cash that will be in cash and which is still debotrs raised that will be shown in debtors account)
2. Equipment 3914
To Crediotrs 3914
(being Equipment Purchased against long term credit note means no cash is paid out so there is creditors account opened)
3. Rent for Equipment and Aircraft 6736
Prepaid Rent 5928
To Cash 12664
(cash paid so that will be credited and which amount belong to this year that will be debited to this year and balance amount will be debited to Prepaid Insurance account , amount of prepaid insurance is 12664-6736= 5928. because the amount is paid in advance so that is prepaid amount)
4. Repair 1344
To cash a/c 1344
(amount spent cash for repairs so cash goes out so that will be credited and expenses are debited.)
5. cash 38685
To Customers 38685
(amount recd. on account thus that amount will be credited to customers as cumtors balance will be reduced, cash comes so that will be debited. here not mentioned customer name if that is mentione then we will put the particular customer name )
6. Customers 390
To cash 390
(being amount paid on long term note)
7. cash 40million
To Share capital 40million
(being share capital ssued )
8. Employees 15276
To Cash 15276
( being payment paid to employees)
9. Spare parts a/c 13764
To Cash 13764
( being amount paid and purchases made particular for asset aircraft and equipment that amount will be added to asset because spareparts are purchased for fixed assets. thus this amount will be added in that in Balance Sheet)
10. Profit and Loss a/c 7650
To Spare parts 7650
(being spare part used that will be shownin profit and loss account)
11.Accounts Payable 1264
To Cash 1264
(being Accounts payable having credit balance now we have paid so their's balance will be reduce and so that are debited and cash is paid out thus that will be credited )
12. Purcahse Order 136
To Accounts Receivable 136