17. Balance sheet The balance sheet provides a snapshot of the financial condition of a company. Investors and analysts use the information given on the balance sheet and other financial statements to make several interpretations regarding the company's financial condition and performance. Cold Goose Metal Works Inc. is a hypothetical company. Suppose it has the following balance sheet items reported at the end of its first year of operation. For the second year, some parts are still incomplete. Use the information given to complete the balance sheets for Cold Goose Metal Works Inc. for the years ending December 31, Year 2 and 1, respectively. Cold Goose Metal Works Inc. Balance Sheet For the Year ended December 31 Year 2 Year 1 Year 2 Year 1 Assets Liabilities and equity Current assets: Current liabilities: $0 $0 Cash and equivalents Accounts receivable $145,125 $16,875 $2,344 $0 $36,900 $13,500 $39,600 $90,000 Accounts payable Accruals Notes payable Total current liabilities Inventories $49,500 $13,281 $12,500 Total current assets $112,500 $15,625 $12,500 Net fixed assets: Long-term debt $46,875 $62,500 $37,500 $50,000 Net plant and equipment $137,500 $110,000 Total debt $121,875 Common equity: Common stock Retained earnings Total common equity Total liabilities and equity $65,625 $187,500 $250,000 $97,500 $52,500 $150,000 $200,000 Total assets $250,000 $200,000 Given the information in the preceding balance sheet-and assuming that Cold Goose Metal Works Inc. has 50 million shares of common stock outstanding-read each of the following statements, then identify the selection that best interprets the information conveyed by the balance sheet. Statement #1: Cold Goose's net collection of inventory items increased by more than the firm sold between Years 1 and 2. This statement is correct , because: O The accounts receivable balance increased by $3,375 between Years 1 and 2. O The accruals balance decreased by $2,344 between Years 1 and 2. O Total inventories of raw materials, work-in-process, and final goods decreased by $9,900 between Year 1 and Year 2. O Total inventories of raw materials, work-in-process, and final goods increased from $39,600 to $49,500 between Year 1 and Year 2. Statement #2: On December 31 of Year 2, Cold Goose Metal Works Inc. had $46,125 of actual money that it could have spent immediately. This statement is true , because: O The funds recorded in Cold Goose's cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately. O The funds recorded in Cold Goose's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately. O Cold Goose's Year 2 cash and equivalents balance is $116,100. Statement #3: One way to interpret the change in Cold Goose's accounts receivable balance from Year 1 to Year 2 is that more customers purchased new items on credit rather than paying off existing credit accounts. This statement is correct , because: The $3,375 increase in accounts receivable means either that Year 1's existing credit customers are not paying off their owed balances and new or existing customers are making additional purchases on credit, or that Year 1's credit customers have repaid their owed balances and Year 2 credit sales have exceeded Year 1's credit sales. The change from $39,600 to $49,500 reflects a net accumulation of new credit sales. The decrease from $16,875 to $13,500 implies a net decrease in accounts receivable and that more customers are paying off their receivables balances than are buying on credit. Based on your understanding of the different items reported on the balance sheet and the information they provide, which statement regarding Cold Goose Metal Works Inc.'s balance sheet is consistent with U.S. Generally Accepted Accounting Principles (GAAP)? The company's debts should be listed from those carrying the largest balance to those with the smallest balance. The company's debts are listed in the order in which they are to be repaid. The company's debts should be listed in order of their liquidity. 17. Balance sheet The balance sheet provides a snapshot of the financial condition of a company. Investors and analysts use the information given on the balance sheet and other financial statements to make several interpretations regarding the company's financial condition and performance. Cold Goose Metal Works Inc. is a hypothetical company. Suppose it has the following balance sheet items reported at the end of its first year of operation. For the second year, some parts are still incomplete. Use the information given to complete the balance sheets for Cold Goose Metal Works Inc. for the years ending December 31, Year 2 and 1, respectively. Cold Goose Metal Works Inc. Balance Sheet For the Year ended December 31 Year 2 Year 1 Year 2 Year 1 Assets Liabilities and equity Current assets: Current liabilities: $0 $0 Cash and equivalents Accounts receivable $145,125 $16,875 $2,344 $0 $36,900 $13,500 $39,600 $90,000 Accounts payable Accruals Notes payable Total current liabilities Inventories $49,500 $13,281 $12,500 Total current assets $112,500 $15,625 $12,500 Net fixed assets: Long-term debt $46,875 $62,500 $37,500 $50,000 Net plant and equipment $137,500 $110,000 Total debt $121,875 Common equity: Common stock Retained earnings Total common equity Total liabilities and equity $65,625 $187,500 $250,000 $97,500 $52,500 $150,000 $200,000 Total assets $250,000 $200,000 Given the information in the preceding balance sheet-and assuming that Cold Goose Metal Works Inc. has 50 million shares of common stock outstanding-read each of the following statements, then identify the selection that best interprets the information conveyed by the balance sheet. Statement #1: Cold Goose's net collection of inventory items increased by more than the firm sold between Years 1 and 2. This statement is correct , because: O The accounts receivable balance increased by $3,375 between Years 1 and 2. O The accruals balance decreased by $2,344 between Years 1 and 2. O Total inventories of raw materials, work-in-process, and final goods decreased by $9,900 between Year 1 and Year 2. O Total inventories of raw materials, work-in-process, and final goods increased from $39,600 to $49,500 between Year 1 and Year 2. Statement #2: On December 31 of Year 2, Cold Goose Metal Works Inc. had $46,125 of actual money that it could have spent immediately. This statement is true , because: O The funds recorded in Cold Goose's cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately. O The funds recorded in Cold Goose's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately. O Cold Goose's Year 2 cash and equivalents balance is $116,100. Statement #3: One way to interpret the change in Cold Goose's accounts receivable balance from Year 1 to Year 2 is that more customers purchased new items on credit rather than paying off existing credit accounts. This statement is correct , because: The $3,375 increase in accounts receivable means either that Year 1's existing credit customers are not paying off their owed balances and new or existing customers are making additional purchases on credit, or that Year 1's credit customers have repaid their owed balances and Year 2 credit sales have exceeded Year 1's credit sales. The change from $39,600 to $49,500 reflects a net accumulation of new credit sales. The decrease from $16,875 to $13,500 implies a net decrease in accounts receivable and that more customers are paying off their receivables balances than are buying on credit. Based on your understanding of the different items reported on the balance sheet and the information they provide, which statement regarding Cold Goose Metal Works Inc.'s balance sheet is consistent with U.S. Generally Accepted Accounting Principles (GAAP)? The company's debts should be listed from those carrying the largest balance to those with the smallest balance. The company's debts are listed in the order in which they are to be repaid. The company's debts should be listed in order of their liquidity