2. Balance sheet Aa Aa 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 sheet Cold Goose Metal Works Inc. Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Liabilities and equity Assets Current liabilities: Current assets: Cash and equivalents $5,535 Accounts payable $0 $0 Accruals Accounts receivable 2,531 2,025 352 Notes payable Inventories 1,875 7,425 5,940 1,992 Total current assets $16,875 $13,500 Total current liabilities $1,875 Net fixed assets: Long-term debt 7,031 5,625 Net plant and equipment $16,500 Total debt $9,375 $7,500 Common equity: Common stock 18,281 14,625 Retained earnings 7,875 Total common equity $28,125 $22,500 Total assets Total liabilities and equity $37,500 $30,000 $37,500 $30,000 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 because: Q The accruals balance decreased by $352 million between Years 1 and 2 O The accounts receivable balance increased by $506 million between Years 1 and 2 O Total inventories of raw materials, work-in-process, and final goods increased from $5,940 million to $7,425 million between Year 1 and Year 2 Statement #2 : In Year 2, Cold Goose Metal Works Inc. was profitable. This statement is because: O Cold Goose's total assets increased between Years 1 and 2 O Cold Goose's retained earnings account increased between the end of Years and 2 O The cash and equivalents account increased between Years 1 and 2 Statement #3 : The book value of one of Cold Goose's fixed assets calculated as the original cost of the asset minus its annual depreciation expense. This statement is because: O An asset's net book value is calculated by adding its annual depreciation expense its total historic and installation costs O An asset's book value is calculated by subtracting its accumulated depreciation expense from its total historic and installation costs O An asset's net book value is calculated by subtracting its annual depreciation expense from its total historic and installation costs Based on your understanding of the different items reported in 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)? O The company's assets should be listed from those carrying the largest balance to those with the smallest balance. O The company's assets should be listed in alphabetical order. O The company's assets should be listed in the order in which they are to be converted into cash