176 Cute Camel Woodcraft Company Balance Sheet for Year Ending December 31 (Millions of dollars) Year 2 Year 1 Year 2 Year 1 Assets Liabilities and equity Current assets: Current liabilities: Cash and equivalents $2,767 Accounts payable $0 $0 Accounts receivable 1,266 1,013 Accruals 0 Inventories 3,712 2,970 Notes payable 996 937 Total current assets $8,437 $6,750 Total current liabilities $937 Net fixed assets: Long-term debt 3,515 2,813 Net plant and equipment $8,250 Total debt $4,687 $3,750 Common equity: Common stock 9,141 7,313 Retained earnings 3,937 Total common equity $14,063 $11,250 Total assets $18,750 $15,000 Total liabilities and equity $18,750 $15,000 Given the information in the preceding balance sheet-and assuming that Cute Camel Woodcraft Company 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: Cute Camel's net collection of inventory items increased by more than the firm's sales between Years 1 and 2. This statement is because Total inventories of raw materials, work in process, and final goods decreased by $742 million between Year 1 and Year 2 Total inventories of raw materials, work in process, and final goods increased from $2,970 million to $3,712 million between Year 1 and Year 2 The accruals balance decreased by $176 million between Years 1 and 2 Statement #2: In Year 2, Cute Camel Woodcraft Company was profitable This statement is because: Cute Camel's retained earrings account increased between the end of Years 1 and 2 Cute Camel's total assets increased between years 1 and 2 The cash and equivalents account increased between Years 1 and 2 Statement #3: One way to interpret the change in Cute Camel'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 ols This statement is because: The decrease from $1,266 million to $1,013 million implies a net decrease in accounts receivable and that more customers are paying off their receivables balances than are buying on credit The change from $2,970 million to $3,712 million reflects a net accumulation of new credit sales O The $253 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 I's credit customers have repaid their owed balances and Year 2 credit sales have exceeded Year l's credit sales Is Suctory Based on your understanding of the different items reported on the balance sheet and the information they provide, which statement regarding Cute Camel Woodcraft company's balance sheet is consistent with U.S. Generally Accepted Accounting Principles (GAAP)? The company's debts are listed in the order in which they are to be repaid. The company's debts should be listed from those carrying the largest balance to those with the smallest balance The company's debts should be listed in order of their liquidity