Tutorial 2 Question P3-6

T-accounts for May 31, 2011

Property and Equipment (net) (BB) $8,362 Retained Earnings $5,827 (BB) Accounts Payable $835 (BB) Accrued Expenses Payable $1,675 (BB) Long-term Notes Payable $667 (BB) Prepaid Expenses (BB) $82 Other Noncurrent Assets (BB) $1,850 Contributed Capital $492 (BB) Receivables (BB) $1,162 Other current assets (BB) $1,196 Cash (BB) $360 Spare parts, supplies and Fuel (BB) $294 Other noncurrent liabilities $3,513 (BB) Other current liabilities $297 (BB)

Temporary T-accounts Revenue $0 (BB) Rent Expense (BB) $0 Wages Expense (BB) $0 Cost of Sales (BB) $0

Transactions A) Provided delivery service to customers, receiving $4,567 in accounts receivable and $17,600 in cash DR. Accounts Receivable $4,567 DR. Cash $17,600 CR. Revenue $22,167

Transactions B) Purchased new equipment costing $1,345; signed a long-term note DR. Property and Equipment $1,345 CR. Long-term notes payable

Transactions C) Paid $4,598 cash to rent equipment and aircraft, with $3,067 for rental this year and the rest for rent next year. ? DR. Prepaid Expenses $4,598 CR. Cash DR. Rent Expense $3,067 CR. Prepaid Expenses

Transactions D) Spent $1,348 in cash to maintain and repair facilities and equipment during the year. DR. Property and Equipment $1,348 CR. Cash

Transactions E) Collected $4,824 from customers on account DR. Cash CR. Accounts Receivable

Transactions F) Repaid $18 on a long term note DR. Long-term notes payable $18 CR. Cash

Transactions G) Issued additional stock for $16 DR. Cash $16 CR. Contributed Capital

Transactions H) Paid employees $10,031 during the year DR. Wage Expense $10,031 CR. Cash

Transactions I) Purchased in cash and used $5,348 in fuel for the aircraft and equipment during the year. DR. Spare parts, supplies and fuel $5,348 CR. Cash DR. Cost of Sales $5,348 CR. Spare parts, supplies and fuel

Transactions J) Paid $784 on accounts payable DR. Accounts payable CR. Cash

Transactions K) Ordered $72 in spare parts and supplies Only ordered, no goods received yet Not a transaction

2012 Effects

Current Assets Noncurrent Assets Cash (BB) $360 17,600 (E) 4,824 (G) 16 $4,598 (C) 1,348 (D) 18 (F) 10,031 (H) 5,348 (I) 784 (J) (EB) $673 Prepaid Expenses (BB) $82 (C) 4,598 $ 3,067 (C) (EB) $1,613 Property and Equipment (net) (BB) $8,362 (B) 1,345 (D) 1,348 (EB) 11,055 Spare parts, supplies and Fuel (BB) $294 (I) 5,348 (EB) $294 Other Noncurrent Assets (BB) $1,850 (EB) $1,850 Receivables (BB) $1,162 (A) 4,567 4,824 (E) (EB) $ 905 Other current assets (BB) $1,196 (EB) $1,196

Noncurrent Liabilities Stockholder’s Equity Current Liabilities Accounts Payable (J) $784 $835 (BB) $51 (EB) Long-term Notes Payable (F) $18 $ 667 (BB) 1,345 (B) $1,994 (EB) Retained Earnings $5,827 (BB) ? Accrued Expenses Payable $1,675 (BB) $1,675 (EB) Contributed Capital $492 (BB) 16 (G) $508 (EB) Other noncurrent liabilities $3,513 (BB) $3,513 (EB) Other current liabilities $297 (BB) $297 (EB)

Temporary T-accounts Revenue $0 (BB) 22,167 (A) 22,167 (EB) Rent Expense (BB) $0 (C) 3,067 (EB) $3,067 Wages Expense (BB) $0 (H) 10,031 (EB) 10,031 Cost of Sales (BB) $0 (I) 5,348 (EB) 5,348

(in millions of dollars) Income Statement FedEx, Inc. Income Statement For Year Ended May 31, 2012 (in millions of dollars) Revenues $ 22,167 Cost of Sales 5,348 Gross Margin 16,819 Operating Expenses Rent 3,067 Wages 10,031 Total Expenses 13,098 Net Income 3,721

Statement of Stockholder’s Equity (in millions of dollars) Statement of SE FedEx, Inc. Statement of Stockholder’s Equity For Year Ended May 31, 2012 (in millions of dollars) Retained Earnings, May 31, 2011 $ 5,827 Add: Net Income for the year 3,721 Retained Earnings, May 31, 2012 $ 9,548

(in millions of dollars) Balance Sheet FedEx, Inc. Balance Sheet As of May 31, 2012 (in millions of dollars) Assets Liabilities Current Assets: Current Liabilities: Cash $ 673 Accounts Payable $ 51 Receivables 905 Accrued Expenses Payable 1,675 Prepaid Expenses 1,613 Other current liabilities 297 Spare parts, supplies & fuel 294 Total current liabilities 2,023 Other current Assets 1,196 Long-term Notes Payable 1,994 Total Current Assets: 4,681 Other noncurrent liabilities 3,513 Property and equipment, net 11,055 Stockholder’s Equity Other noncurrent assets 1,850 Contributed Capital $ 508 Total Assets: 17,586 Retained Earnings 9,548 Total Liabilities and SE

Statement of Cash Flows? FedEx, Inc. Statement of Cash Flows For Year Ended May 31, 2012 (in millions of dollars) Cash flows from operating activities Collected from customers A) 17,600 + E) 4824 Paid to suppliers and employees C) 4,598? + H) 10031 + I) 5348 + J) 784 Cash paid for interest Cash flows from investing activities Cash paid to purchase equipment Cash paid to maintain and repair facilities and equipment D) 1348 Cash flows from financial activities Cash received from stock issue G) 16 Cash paid to repay long-term notes F) 18 Draft slide

Statement of Cash Flows FedEx, Inc. Statement of Cash Flows For Year Ended May 31, 2012 (in millions of dollars) Cash flows from operating activities Collected from customers $ 22,424 Paid to suppliers and employees (20,761) Net cash flow from operating activities $ 1,663 Cash flows from investing activities Cash paid to maintain and repair facilities and equipment (1,348) Net cash flow from investing activities $ (1,348) Cash flows from financial activities Cash received from stock issue 16 Cash paid to repay long-term notes (18) Net cash flow from financial activities $ (2) Total Change in Cash 313 Cash at beginning of year 360 Cash at end of year 673 Statement of Cash Flows

Total Asset Turnover Ratio Measures sales generated per dollar of assets. Higher = more efficient at managing assets. Total Asset Turnover Ratio Sales (or Operating) Revenues Average Total Assets = (Beginning total assets + ending total assets) / 2

Total Asset Turnover Ratio 1.44 22,167 15,446 = (13,306 + 17,586) / 2

Total Asset Turnover Ratio 1.44 Very hard to tell anything without comparing to close competitors