Ch 02: Assignment Hinancial Statements, Cash Flow, and Taxes 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 year of Cold Goose Metal Works Inc. is a hypothetical company. Suppose it has the following balance sheet items reported at the end of it 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 Assets Liabilities and equity Current assets: Cash and equivalents Accounts receivable Current liabilities: Accounts payable $0 234 $3,690 1,350 3,960 $9,000 1,688 4,950 $11,250 Inventories Total current assets Accruals Notes payable Total current liabilities 1,328 1.250 $1,250 Net foxed assets: Net plant and equipment Long-term debt 4,688 3,750 $11,000 $6,250 Total debt Common equity: $5,000 Common stock 12,188 9,750 Retained earnings Total common equity Total liabilities and equity 5.250 515,000 520.000 Total assets $25,000 $18,750 $25,000 $20,000 Given the information in the preceding balance sheet-and assuming that Cold Goose Metal Works Inc. has 50 millions $25,000 $20,000 TOU Total assets 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 pool of relatively liquid assets, which are available to support the company's current and future sales, decreased from Year 1 to Year 2 This statement is because: O Cold Goose's total current liabilities balance decreased by $2,250 million between Year 1 and Year 2 O Cold Goose's total current liabilities balance increased from $1,350 million to $1,688 million between Year 1 and Year 2. O Cold Goose's total current asset balance actually increased from $9,000 million to $11,250 million between Year 1 and Year 2 Statement #2: On December 31 of Year 2, Cold Goose Metal Works Inc. had $4,612 million of actual money that it could have spent immediately This statement is because: 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 Cold Goose's Year 2 cash and equivalents balance is $11,610 million The funds recorded in Cold Goose's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately 2. Assgnment - Financial Statements, Cash Flow, and Taxes This statement is because: Cold Goose's total current liabilities balance decreased by $2,250 million between Year 1 and Year 2 O Cold Goose's total current liabilities balance increased from $1,350 million to $1,688 million between Year 1 and Year 2 O Cold Goose's total current asset balance actually increased from $9,000 million to $11,250 million between Year 1 and Year 2 Statement #2: On December 31 of Year 2, Cold Goose Metal Works Inc. had $4,612 million of actual money that it could have spent immediately This statement is because: 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. Cold Goose's Year 2 cash and equivalents balance is $11,610 million. The funds recorded in Cold Goose's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately. 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 because: The change from $3,960 million to $4.950 million reflects a net accumulation of new credit sales The 333 million increase in accounts receivable means either that year's existing credit customers are not in the The funds recorded in Cold Goose's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately 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 because: The ch incorrect 3,960 million to $4,950 million reflects a net accumulation of new credit sales. The $3 correct crease 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. 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. 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)? The company's assets should be listed from those carrying the largest balance to those with the smallest balance. 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 in alphabetical order