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CHAPTER 3 Operating Decisions and the Accounting System 157

c. Paid $7,864 cash to rent equipment and aircraft, with $3,136 for rent this year and the rest for rent next year.
d. Spent $864 cash to repair facilities and equipment during the year.
e. Collected $24,285 from customers on account.
f. Repaid $150 on a long-term note (ignore interest).
g. Issued 20 million additional shares of $0.10 par value stock for $16 (that's $16 million).
h. Paid employees $9,276 for work during the year.
i. Purchased spare parts, supplies, and fuel for the aircraft and equipment for $6,564 cash.
j. Used $6,450 in spare parts, supplies, and fuel for the aircraft and equipment during the year.
k. Paid $784 on accounts payable.
l. Ordered $88 in spare parts and supplies.

Required:

1. Prepare journal entries for each transaction. Use the account titles that FedEx uses as listed above for balance sheet account effects.
2. Prepare T-accounts for the current year from the preceding list; enter the ending balances from May 31 as the respective beginning balances for June 1 of the current year. You will need additional T-accounts for income statement accounts; enter zero for beginning balances. Post the effects of the transactions in the T-accounts, and compute ending balances.
3. Prepare an unadjusted income statement for the current year ended May 31.
4. Compute the company's net profit margin ratio for the current year ended May 31. Round your answer to two decimal places. What do the results suggest to you about FedEx?

Recording Journal Entries and Identifying Cash Flow Effects

Cedar Fair, L.P. (Limited Partnership), is one of the largest regional amusement park operators in the world, owning 11 amusement parks, two water parks, and four hotels. The parks include Cedar Point in Ohio; Valleyfair near Minneapolis/St. Paul; Dorney Park and Wildwater Kingdom near Allentown, Pennsylvania; Worlds of Fun in Kansas City; Great America in Santa Clara, California; and Canada's Wonderland near Toronto, Canada, among several others. The following are summarized transactions similar to those that occurred in a recent year. Dollars are in thousands.

a. Guests at the parks paid $596,042 cash in admissions.
b. The primary operating expenses for the year were employee wages of $433,416, with $401,630 paid in cash and the rest to be paid to employees in the following year.
c. Cedar Fair paid $47,100 principal on long-term notes payable.
d. The parks sells merchandise in park stores. The cash received during the year for sales was $365,693. The cost of the inventory sold during the year was $92,057.
e. Cedar Fair purchased and built additional rides and other equipment during the year, paying $90,190 in cash.
f. Guests may stay in the parks at accommodations owned by the company. During the year, accommodations revenue was $82,994; $81,855 was paid by the guests in cash and the rest was owed on account.
g. Interest incurred and paid on long-term debt was $153,326.
h. The company purchased $147,531 in inventory for the park stores during the year, paying $119,431 in cash and owing the rest on account.
i. Advertising costs for the parks were $140,426 for the year; $134,044 was paid in cash and the rest was owed on account.
j. Cedar Fair paid $11,600 on accounts payable during the year.

Required:

1. For each of these transactions, record journal entries. Use the letter of each transaction as its reference. Note that transaction (d) will require two entries, one for revenue recognition and one for the related expense.
2. Use the following chart to identify whether each transaction results in a cash flow effect from operating (O), investing (I), or financing (F) activities and indicate the direction and amount of the effect on cash (+ for increase and – for decrease). If there is no cash flow effect, write none . The first transaction is provided as an example.

P3-7
LO3-4, 3-7

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10/22/18 08:22 PM