P3-6

Following are selected account balances (in millions of dollars) from a recent UPS annual report, followed by several typical transactions. Assume that the following are account balances on December 31 (end of the prior fiscal year):

Account	Balance	Account	Balance
Property, plant, and equipment (net)	$18,494	Receivables	$2,699
Retained earnings	14,206	Other current assets	1,109
Accounts payable	1,717	Cash	1,344
Prepaid expenses	338	Spare parts, supplies, and fuel	857
Accrued expenses payable	2,530	Other non-current liabilities	3,980
Long-term notes payable	1,950	Other current liabilities	2,399
Other non-current assets	3,242	Additional Paid-in Capital	1,297
Common stock ($0.01 par value)	4

These accounts are not necessarily in good order and have normal debit or credit balances. (Note: Because these are not all of UPS's accounts, these will not balance in a trial balance.) Assume the following transactions (in millions, except for par value) occurred the next fiscal year beginning January 1 (the current year):

1. Provided delivery service to customers, who paid $12,890 in cash and owed $40,704 on account.
2. Purchased new equipment costing $3,894; signed a long-term note.
3. Paid $12,464 cash to rent equipment and aircraft, with $6,586 for rent this year and the rest for rent next year (a prepaid expense).
4. Spent $1,324 cash to repair facilities and equipment during the year.
5. Collected $38,085 from customers on account.
6. Repaid $380 on a long-term note (ignore interest).
7. Issued 200 million additional shares of $0.01 par value stock for $39 (thats $39 million).
8. Paid employees $15,026 for work during the year.
9. Purchased spare parts, supplies, and fuel for the aircraft and equipment for$13,464 cash.
10. Used $7,600 in spare parts, supplies, and fuel for the aircraft and equipment during the year.
11. Paid $1,244 on accounts payable.
12. Ordered $134 in spare parts and supplies.

Required:

1. Prepare journal entries for each transaction.
2. Enter the ending balances from December 31 as the respective beginning balances for January 1 of the current year. Record in the T-accounts the effects of each transaction. Label each using the letter of the transaction.
3. Prepare an unadjustedincome statement for the current year ended December 31.
4. Compute the company's net profit margin ratio for the current year ended December 31.