Tutorial 2
Question P3-6
T-accounts for May 31, 2011
Property and Equipment
(net)
Retained Earnings
Accounts Payable
$5,827 (BB)
$835 (BB)
(BB) $8,362
Prepaid Expenses
Accrued Expenses
Payable
(BB) $82
Long-term Notes Payable
$667 (BB)
$1,675 (BB)
Other Noncurrent Assets
Contributed Capital
(BB) $1,850
$492 (BB)
Other current assets
(BB) $1,196
Cash
(BB) $360
Receivables
(BB) $1,162
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
DR. Cash
CR. Revenue
$4,567
$17,600
$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
$1,345
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
CR. Cash
$4,598
DR. Rent Expense
CR. Prepaid Expenses
$3,067
$4,598
$3,067
Transactions
• D) Spent $1,348 in cash to maintain and repair
facilities and equipment during the year.
DR. Property and Equipment
CR. Cash
$1,348
$1,348
Transactions
• E) Collected $4,824 from customers on
account
DR. Cash
CR. Accounts Receivable
$4,824
$4,824
Transactions
• F) Repaid $18 on a long term note
DR. Long-term notes payable
CR. Cash
$18
$18
Transactions
• G) Issued additional stock for $16
DR. Cash
CR. Contributed Capital
$16
$16
Transactions
• H) Paid employees $10,031 during the year
DR. Wage Expense
CR. Cash
$10,031
$10,031
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
$5,348
DR. Cost of Sales
$5,348
CR. Spare parts, supplies and fuel
$5,348
Transactions
• J) Paid $784 on accounts payable
DR. Accounts payable
CR. Cash
$784
$784
Transactions
• K) Ordered $72 in spare parts and supplies
– Only ordered, no goods received yet
– Not a transaction
2012 Effects
Current Assets
Cash
(BB) $360
(A) 17,600
(E) 4,824
(G)
16
Prepaid Expenses
$4,598 (C)
1,348 (D)
18 (F)
10,031 (H)
5,348 (I)
784 (J)
(EB) $673
Receivables
(BB) $1,162
(A) 4,567
(EB) $ 905
Noncurrent Assets
4,824 (E)
(BB) $82
(C) 4,598
$ 3,067 (C)
(EB) $1,613
Spare parts, supplies and
Fuel
(BB) $294 (I) 5,348
(I) 5,348
(EB) $294
Other current assets
(BB) $1,196
(EB) $1,196
Property and Equipment
(net)
(BB) $8,362
(B) 1,345
(D) 1,348
(EB) 11,055
Other Noncurrent Assets
(BB) $1,850
(EB) $1,850
Current Liabilities
Noncurrent
Liabilities
Stockholder’s
Equity
Accounts Payable
Long-term Notes Payable
Retained Earnings
(J) $784
$835 (BB)
$51 (EB)
(F) $18
$ 667 (BB)
1,345 (B)
$5,827 (BB)
?
$1,994 (EB)
Accrued Expenses
Payable
$1,675 (BB)
$1,675 (EB)
Contributed Capital
Other noncurrent
liabilities
$3,513 (BB)
$3,513 (EB)
Other current liabilities
$297 (BB)
$297 (EB)
$492 (BB)
16 (G)
$508 (EB)
Temporary T-accounts
Revenue
Rent Expense
Wages Expense
$0 (BB)
22,167 (A)
(BB) $0
(C) 3,067
(BB) $0
(H) 10,031
22,167 (EB)
(EB) $3,067
(EB) 10,031
Cost of Sales
(BB) $0
(I) 5,348
(EB) 5,348
Income Statement
FedEx, Inc.
Income Statement
For Year Ended May 31, 2012
(in millions of dollars)
Revenues
Cost of Sales
Gross Margin
$ 22,167
5,348
16,819
Operating Expenses
Rent
3,067
Wages
10,031
Total Expenses
13,098
Net Income
3,721
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
$
Add: Net Income for the year
Retained Earnings, May 31, 2012
5,827
3,721
$
9,548
Balance Sheet
FedEx, Inc.
Balance Sheet
As of May 31, 2012
(in millions of dollars)
Assets
Liabilities
Current Assets:
Cash
Receivables
Prepaid Expenses
Spare parts, supplies & fuel
Other current Assets
Total Current Assets:
Property and equipment, net
Other noncurrent assets
Total Assets:
Current Liabilities:
$ 673
905
1,613
294
Accounts Payable
$
Accrued Expenses Payable
51
1,675
Other current liabilities
297
Total current liabilities
2,023
1,196 Long-term Notes Payable
1,994
4,681 Other noncurrent liabilities
3,513
11,055
Stockholder’s Equity
1,850 Contributed Capital
17,586 Retained Earnings
Total Liabilities and SE
$
508
9,548
17,586
FedEx, Inc.
Statement of Cash Flows
For Year Ended May 31, 2012
(in millions of dollars)
Statement of Cash Flows
Cash flows from operating activities
Collected from customers
$
22,424
Paid to suppliers and employees
Net cash flow from operating activities
(20,761)
$
1,663
Cash flows from investing activities
Cash paid to maintain and repair facilities and equipment
Net cash flow from investing activities
(1,348)
$
(1,348)
Cash flows from financial activities
Cash received from stock issue
16
Cash paid to repay long-term notes
Net cash flow from financial activities
(18)
$
(2)
Total Change in Cash
313
Cash at beginning of year
360
Cash at end of year
673
Total Asset Turnover Ratio
Total Asset
Turnover
Ratio
Sales (or Operating) Revenues
=
Average Total Assets
(Beginning total assets +
ending total assets) / 2
• Measures sales generated per dollar of assets.
Higher = more efficient at managing assets.
Total Asset Turnover Ratio
22,167
1.44
=
15,446
(13,306 + 17,586) / 2
Total Asset Turnover Ratio
• 1.44
• Very hard to tell anything without comparing
to close competitors