2. 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. Cute Camel Woodcraft Company 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. 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 $3,690 $0 $0 Accounts payable Accruals Accounts receivable 1,688 1,350 234 Inventories 4,950 3,960 Notes payable 1,328 1,250 Total current assets $11,250 $9,000 Total current liabilities $1,250 3,750 Net fixed assets: Long-term debt 4,688 Net plant and equipment $11,000 Total debt $6,250 $5,000 Common equity: Common stock 12,188 9,750 Retained earnings 5,250 Total common equity $18,750 $15,000 Total assets $25,000 $20,000 Total liabilities and equity $25,000 $20,000 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 increased from $3,960 million to $4,950 million between Year 1 and Year 2 Total inventories of raw materials, work-in-process, and final goods decreased by $990 million between Year 1 and Year 2 O The accruals balance decreased by $234 million between Years 1 and 2 Statement #2: Over the past two years, Cute Camel Woodcraft Company has relied more on the use of short-term debt than on long- term debt financing This statement is , because: O Cute Camel's total current liabilities decreased by $312 million, while its long-term debt account decreased by $938 million Cute Camel's total current liabilities increased by $312 million, while its use of long-term debt increased by $938 million O Cute Camel's total notes payable increased by $78 million, while its common stock account increased by $2,438 million 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. This statement is because: O The decrease from $1,688 million to $1,350 million implies a net decrease in accounts receivable and that more customers are paying off their receivables balances than are buying on credit O The change from $3,960 million to $4,950 million reflects a net accumulation of new credit sales The $338 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 Based on your understanding of the different items reported in 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 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. The company's assets should be listed from those carrying the largest balance to those with the smallest balance