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Cute Camel Woodcraft Company Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Assets Current assets:

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Cute Camel Woodcraft Company Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Assets Current assets: Cash and equivalents Accounts receivable Inventories Total current assets Liabilities and equity Current liabilities: Accounts payable Accruals Notes payable Total current liabilities $4,612 1,688 4,950 $11,250 2,109 6,187 $14,062 $0 293 1,660 1,562 $1,562 4,688 $6,250 Net fixed assets: Net plant and equipment 5,859 $7,812 $13,750 Long-term debt Total debt Common equity: Common stock Retained earnings Total common equity Total liabilities and equity 15,235 $23,438 $31,250 12,188 6,562 $18,750 $25,000 Total assets $31,250 $25,000 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 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 Cute Camel's total current liabilities balance decreased by $2,812 million between Year 1 and Year 2 Cute Camel's total current asset balance increased from $11,250 million to $14,062 million between Year 1 and Year 2 Cute Camel's total current asset balance decreased from $14,062 million to $11,250 million between Year 1 and Year 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 O O Cute Camel's total current liabilities decreased by $391 million, while its long-term debt account decreased by $1,171 million Cute Camel's total current liabilities increased by $391 million, while its use of long-term debt increased by $1,171 million Cute Camel's total notes payable increased by $98 million, while its common stock account increased by $3,047 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 $421 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 The change from $4,950 million to $6,187 million reflects a net accumulation of new credit sales The decrease from $2,109 million to $1,688 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 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 should be listed in order of their liquidity. The company's debts should be listed from those carrying the largest balance to those with the smallest balance. The company's debts are listed in the order in which they are to be repaid. O

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