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. Green Caterpillar Garden Supplies 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. Green Caterpillar Garden Supplies 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 $3,690 Accounts payable $0 $0 Accounts receivable 1,688 1,350 Accruals 234 0 Inventories 4,950 3,960 Notes payable 1,328 1,250 Total current assets $11,250 $9,000 Total current liabilities $1,250 Net fixed assets: Long-term debt 4,688 3,750 Net plant and equipment $11,000 Total debt $6,250 $5,000 Common equity: Common stock 12,188 9,750 5,250 Retained earnings Total common equity Total liabilities and equity $18,750 $15,000 Total assets $25,000 $ 20,000 $25,000 $20,000 Given the information in the preceding balance sheet-and assuming that Green Caterpillar Garden Supplies 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: Green Caterpillar'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 Green Caterpillar's total current asset balance decreased from $11,250 million to $9,000 million between Year 1 and Year 2. O Green Caterpillar's total current asset balance actually increased from $9,000 million to $11,250 million between Year 1 and Year 2. O Green Caterpillar's total current liabilities balance increased from $1,350 million to $1,688 million between Year 1 and Year 2. Statement #2: On December 31 of Year 2, Green Caterpillar Garden Supplies Inc. had $4,612 million of actual money that it could have spent immediately. This statement is because: O Green Caterpillar's Year 2 cash and equivalents balance is $11,610 million. The funds recorded in Green Caterpillar's cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately. The funds recorded in Green Caterpillar's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately. Statement #3: The book value per share of Green Caterpillar's stock in Year 2 was $375.00. This statement is because: The per-share book value is calculated by dividing the company's total common equity by the number of outstanding shares of common stock. The per-share book value is calculated by dividing the company's total assets by the number of outstanding shares of common stock. The per-share book value is calculated by dividing the company's total debt by the number of outstanding shares of common stock. Based on your understanding of the different items reported on the balance sheet and the information they provide, which statement regarding Green Caterpillar Garden Supplies Inc.'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. O The company's debts are listed in the order in which they are to be repaid
