Cold Goose Metal Works Inc. 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 $5,535 Accounts payable SC $0 Accounts receivable 2,531 2,025 Accruals 352 0 Inventories 7,425 5,940 Notes payable 1,992 1,875 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 $37,500 $30,000 Total liabilities and equity $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 pool of relatively liquid assets, which are available to support the company's current and future sales, decreased from Year 1 to Year 2. because: This statement is O Cold Goose's total current liabilities balance increased from $2,025 million to $2,531 million between Year 1 and Year 2 O Cold Goose's total current asset balance actually increased from $13,500 million to $16,875 million between Year 1 and Year 2 O Cold Goose's total current asset balance decreased from $16,875 million to $13,500 million between Year 1 and Year 2 Statement #2: In Year 2, Cold Goose Metal Works Inc. was profitable. This statement is because: O The cash and equivalents account increased between Years 1 and 2 Cold Goose's total assets increased between Years 1 and 2 Cold Goose's retained earnings account increased between the end of Years 1 and 2 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: O The $506 increase in accounts receivable means either that Year 1's existing credit customers are not existing customers are making additional purchases on or that Year 1's credit customers have repaid their owed balances and Year 2 credit sales have paying off their owed balances and new or credit, exceeded Year 1's credit sales The change from $5,940 million to $7,425 million reflects a net accumulation of new credit sales The decrease from $2,531 million to $2,025 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
